Correlation Between LiCycle Holdings and Cincinnati Financial

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

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

Diversification Opportunities for LiCycle Holdings and Cincinnati Financial

0.68

Correlation Coefficient

LiCycle Holdings  Cincinnati Financial

Poor diversification

The 3 months correlation between LiCycle and Cincinnati is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding LiCycle Holdings Corp and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and LiCycle Holdings 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 LiCycle Holdings Corp 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 LiCycle Holdings i.e., LiCycle Holdings and Cincinnati Financial go up and down completely randomly.

Pair Corralation between LiCycle Holdings and Cincinnati Financial

Given the investment horizon of 90 days LiCycle Holdings Corp is expected to under-perform the Cincinnati Financial. In addition to that, LiCycle Holdings is 3.92 times more volatile than Cincinnati Financial. It trades about -0.38 of its total potential returns per unit of risk. Cincinnati Financial is currently generating about 0.06 per unit of volatility. If you would invest  14,248  in Cincinnati Financial on December 2, 2024 and sell it today you would earn a total of  533.00  from holding Cincinnati Financial or generate 3.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

LiCycle Holdings Corp  vs.  Cincinnati Financial

LiCycle Holdings Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days LiCycle Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Cincinnati Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cincinnati Financial has generated negative risk-adjusted returns adding no value to investors with long positions. 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 LiCycle Holdings and Cincinnati Financial

The main advantage of trading using opposite LiCycle Holdings and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LiCycle Holdings 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 LiCycle Holdings Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..