Correlation Between CNA Financial and Transcontinental

Can any of the company-specific risk be diversified away by investing in both CNA Financial and Transcontinental at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CNA Financial and Transcontinental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CNA Financial and Transcontinental Realty Investors, you can compare the effects of market volatilities on CNA Financial and Transcontinental and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CNA Financial with a short position of Transcontinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNA Financial and Transcontinental.

Diversification Opportunities for CNA Financial and Transcontinental

0.23

Correlation Coefficient

CNA Financial  Transcontinental

Modest diversification

The 3 months correlation between CNA and Transcontinental is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding CNA Financial and Transcontinental Realty Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental Realty and CNA Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CNA Financial are associated (or correlated) with Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental Realty has no effect on the direction of CNA Financial i.e., CNA Financial and Transcontinental go up and down completely randomly.

Pair Corralation between CNA Financial and Transcontinental

Considering the 90-day investment horizon CNA Financial is expected to generate 0.64 times more return on investment than Transcontinental. However, CNA Financial is 1.57 times less risky than Transcontinental. It trades about 0.05 of its potential returns per unit of risk. Transcontinental Realty Investors is currently generating about -0.06 per unit of risk. If you would invest  4,088  in CNA Financial on October 9, 2024 and sell it today you would earn a total of  655.00  from holding CNA Financial or generate 16.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CNA Financial  vs.  Transcontinental Realty Invest

CNA Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CNA Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Transcontinental Realty

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental Realty Investors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, Transcontinental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CNA Financial and Transcontinental

The main advantage of trading using opposite CNA Financial and Transcontinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNA Financial position performs unexpectedly, Transcontinental can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Transcontinental will offset losses from the drop in Transcontinental's long position.

The idea behind CNA Financial and Transcontinental Realty Investors pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.