Correlation Between JPMorgan Japanese and Cincinnati Financial

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

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

Diversification Opportunities for JPMorgan Japanese and Cincinnati Financial

0.46

Correlation Coefficient

JPMorgan Japanese  Cincinnati Financial

Very weak diversification

The 3 months correlation between JPMorgan and Cincinnati is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Japanese Investment 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 JPMorgan Japanese 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 JPMorgan Japanese Investment 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 JPMorgan Japanese i.e., JPMorgan Japanese and Cincinnati Financial go up and down completely randomly.

Pair Corralation between JPMorgan Japanese and Cincinnati Financial

Assuming the 90 days trading horizon JPMorgan Japanese is expected to generate 2.57 times less return on investment than Cincinnati Financial. But when comparing it to its historical volatility, JPMorgan Japanese Investment is 1.63 times less risky than Cincinnati Financial. It trades about 0.05 of its potential returns per unit of risk. Cincinnati Financial Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  13,411  in Cincinnati Financial Corp on October 9, 2024 and sell it today you would earn a total of  940.00  from holding Cincinnati Financial Corp or generate 7.01% return on investment over 90 days.

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

JPMorgan Japanese Investment  vs.  Cincinnati Financial Corp

JPMorgan Japanese

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Japanese Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, JPMorgan Japanese is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cincinnati Financial Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cincinnati Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with JPMorgan Japanese and Cincinnati Financial

The main advantage of trading using opposite JPMorgan Japanese and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Japanese 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 JPMorgan Japanese Investment 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..