Correlation Between Hardide PLC and Cincinnati Financial

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

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

Diversification Opportunities for Hardide PLC and Cincinnati Financial

-0.79

Correlation Coefficient

Hardide PLC  Cincinnati Financial

Pay attention - limited upside

The 3 months correlation between Hardide and Cincinnati is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Hardide PLC 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 Hardide PLC 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 Hardide PLC 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 Hardide PLC i.e., Hardide PLC and Cincinnati Financial go up and down completely randomly.

Pair Corralation between Hardide PLC and Cincinnati Financial

Assuming the 90 days trading horizon Hardide PLC is expected to generate 2.97 times more return on investment than Cincinnati Financial. However, Hardide PLC is 2.97 times more volatile than Cincinnati Financial Corp. It trades about 0.13 of its potential returns per unit of risk. Cincinnati Financial Corp is currently generating about -0.13 per unit of risk. If you would invest  485.00  in Hardide PLC on November 28, 2024 and sell it today you would earn a total of  190.00  from holding Hardide PLC or generate 39.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Hardide PLC  vs.  Cincinnati Financial Corp

Hardide PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hardide PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Hardide PLC exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Hardide PLC and Cincinnati Financial

The main advantage of trading using opposite Hardide PLC and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hardide PLC 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 Hardide PLC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.