Correlation Between FAST RETAIL and Cincinnati Financial

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

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

Diversification Opportunities for FAST RETAIL and Cincinnati Financial

0.68

Correlation Coefficient

FAST RETAIL  Cincinnati Financial

Poor diversification

The 3 months correlation between FAST and Cincinnati is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR 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 FAST RETAIL 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 FAST RETAIL ADR 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 FAST RETAIL i.e., FAST RETAIL and Cincinnati Financial go up and down completely randomly.

Pair Corralation between FAST RETAIL and Cincinnati Financial

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to under-perform the Cincinnati Financial. In addition to that, FAST RETAIL is 1.14 times more volatile than Cincinnati Financial Corp. It trades about -0.14 of its total potential returns per unit of risk. Cincinnati Financial Corp is currently generating about -0.08 per unit of volatility. If you would invest  14,103  in Cincinnati Financial Corp on December 10, 2024 and sell it today you would lose (1,113) from holding Cincinnati Financial Corp or give up 7.89% of portfolio value over 90 days.

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

FAST RETAIL ADR  vs.  Cincinnati Financial Corp

FAST RETAIL ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days FAST RETAIL ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Cincinnati Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cincinnati Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with FAST RETAIL and Cincinnati Financial

The main advantage of trading using opposite FAST RETAIL and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAST RETAIL 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 FAST RETAIL ADR 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.