Correlation Between Mid Atlantic and Cincinnati Financial

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

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

Diversification Opportunities for Mid Atlantic and Cincinnati Financial

0.0

Correlation Coefficient

Mid Atlantic  Cincinnati Financial

Pay attention - limited upside

The 3 months correlation between Mid and Cincinnati is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mid Atlantic Home Health and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Mid Atlantic 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 Mid Atlantic Home Health 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 Mid Atlantic i.e., Mid Atlantic and Cincinnati Financial go up and down completely randomly.

Pair Corralation between Mid Atlantic and Cincinnati Financial

If you would invest  0.01  in Mid Atlantic Home Health on October 11, 2024 and sell it today you would earn a total of  0.00  from holding Mid Atlantic Home Health or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Mid Atlantic Home Health  vs.  Cincinnati Financial

Mid Atlantic Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mid Atlantic Home Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Mid Atlantic is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Cincinnati Financial

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 4 (%) 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 Mid Atlantic and Cincinnati Financial

The main advantage of trading using opposite Mid Atlantic and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Atlantic 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 Mid Atlantic Home Health 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.