Correlation Between Delek Logistics and Cincinnati Financial

Can any of the company-specific risk be diversified away by investing in both Delek Logistics and Cincinnati Financial 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 Delek Logistics and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Delek Logistics Partners and Cincinnati Financial, you can compare the effects of market volatilities on Delek Logistics and Cincinnati Financial 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 Delek Logistics with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delek Logistics and Cincinnati Financial.

Diversification Opportunities for Delek Logistics and Cincinnati Financial

-0.31

Correlation Coefficient

Delek Logistics  Cincinnati Financial

Very good diversification

The 3 months correlation between Delek and Cincinnati is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Delek Logistics Partners and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Delek Logistics 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 Delek Logistics Partners are associated (or correlated) with Cincinnati Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cincinnati Financial has no effect on the direction of Delek Logistics i.e., Delek Logistics and Cincinnati Financial go up and down completely randomly.

Pair Corralation between Delek Logistics and Cincinnati Financial

Considering the 90-day investment horizon Delek Logistics Partners is expected to under-perform the Cincinnati Financial. In addition to that, Delek Logistics is 1.21 times more volatile than Cincinnati Financial. It trades about -0.04 of its total potential returns per unit of risk. Cincinnati Financial is currently generating about 0.12 per unit of volatility. If you would invest  13,637  in Cincinnati Financial on September 15, 2024 and sell it today you would earn a total of  1,585  from holding Cincinnati Financial or generate 11.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Delek Logistics Partners  vs.  Cincinnati Financial

Delek Logistics Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delek Logistics Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Delek Logistics is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Cincinnati Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Cincinnati Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Delek Logistics and Cincinnati Financial

The main advantage of trading using opposite Delek Logistics and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delek Logistics position performs unexpectedly, Cincinnati Financial 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 Cincinnati Financial will offset losses from the drop in Cincinnati Financial's long position.

The idea behind Delek Logistics Partners and Cincinnati Financial 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 Managers module to screen money managers from public funds and ETFs managed around the world.