Correlation Between Kinsale Capital and Cincinnati Financial

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

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

Diversification Opportunities for Kinsale Capital and Cincinnati Financial

0.21

Correlation Coefficient

Kinsale Capital  Cincinnati Financial

Modest diversification

The 3 months correlation between Kinsale and Cincinnati is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Kinsale Capital Group and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Kinsale Capital 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 Kinsale Capital Group 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 Kinsale Capital i.e., Kinsale Capital and Cincinnati Financial go up and down completely randomly.

Pair Corralation between Kinsale Capital and Cincinnati Financial

Given the investment horizon of 90 days Kinsale Capital Group is expected to generate 1.37 times more return on investment than Cincinnati Financial. However, Kinsale Capital is 1.37 times more volatile than Cincinnati Financial. It trades about 0.04 of its potential returns per unit of risk. Cincinnati Financial is currently generating about 0.03 per unit of risk. If you would invest  46,537  in Kinsale Capital Group on December 30, 2024 and sell it today you would earn a total of  1,677  from holding Kinsale Capital Group or generate 3.6% return on investment over 90 days.

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

Kinsale Capital Group  vs.  Cincinnati Financial

Kinsale Capital Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kinsale Capital Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Kinsale Capital 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

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Cincinnati Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kinsale Capital and Cincinnati Financial

The main advantage of trading using opposite Kinsale Capital and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinsale Capital 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 Kinsale Capital Group 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.