Correlation Between Prosiebensat and Cincinnati Financial

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

By analyzing existing cross correlation between Prosiebensat 1 Media and Cincinnati Financial, you can compare the effects of market volatilities on Prosiebensat 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 Prosiebensat with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosiebensat and Cincinnati Financial.

Diversification Opportunities for Prosiebensat and Cincinnati Financial

-0.83

Correlation Coefficient

Prosiebensat  Cincinnati Financial

Pay attention - limited upside

The 3 months correlation between Prosiebensat and Cincinnati is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Prosiebensat 1 Media and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Prosiebensat 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 Prosiebensat 1 Media 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 Prosiebensat i.e., Prosiebensat and Cincinnati Financial go up and down completely randomly.

Pair Corralation between Prosiebensat and Cincinnati Financial

Assuming the 90 days trading horizon Prosiebensat 1 Media is expected to under-perform the Cincinnati Financial. In addition to that, Prosiebensat is 1.58 times more volatile than Cincinnati Financial. It trades about -0.08 of its total potential returns per unit of risk. Cincinnati Financial is currently generating about 0.14 per unit of volatility. If you would invest  10,829  in Cincinnati Financial on September 29, 2024 and sell it today you would earn a total of  3,096  from holding Cincinnati Financial or generate 28.59% return on investment over 90 days.

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

Prosiebensat 1 Media  vs.  Cincinnati Financial

Prosiebensat 1 Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosiebensat 1 Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cincinnati Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cincinnati Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prosiebensat and Cincinnati Financial

The main advantage of trading using opposite Prosiebensat and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosiebensat 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 Prosiebensat 1 Media 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.