Correlation Between Eco Animal and Cincinnati Financial

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

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

Diversification Opportunities for Eco Animal and Cincinnati Financial

-0.22

Correlation Coefficient

Eco Animal  Cincinnati Financial

Very good diversification

The 3 months correlation between Eco and Cincinnati is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Eco Animal Health and Cincinnati Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial Corp and Eco Animal 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 Eco Animal Health 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 Corp has no effect on the direction of Eco Animal i.e., Eco Animal and Cincinnati Financial go up and down completely randomly.

Pair Corralation between Eco Animal and Cincinnati Financial

Assuming the 90 days trading horizon Eco Animal Health is expected to under-perform the Cincinnati Financial. In addition to that, Eco Animal is 1.14 times more volatile than Cincinnati Financial Corp. It trades about -0.05 of its total potential returns per unit of risk. Cincinnati Financial Corp is currently generating about 0.04 per unit of volatility. If you would invest  13,872  in Cincinnati Financial Corp on October 6, 2024 and sell it today you would earn a total of  296.00  from holding Cincinnati Financial Corp or generate 2.13% return on investment over 90 days.

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

Eco Animal Health  vs.  Cincinnati Financial Corp

Eco Animal Health

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eco Animal Health are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Eco Animal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cincinnati Financial Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cincinnati Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Eco Animal and Cincinnati Financial

The main advantage of trading using opposite Eco Animal and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eco Animal 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 Eco Animal Health and Cincinnati Financial Corp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.