Correlation Between Taylor Maritime and Cincinnati Financial

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

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

Diversification Opportunities for Taylor Maritime and Cincinnati Financial

-0.71

Correlation Coefficient

Taylor Maritime  Cincinnati Financial

Pay attention - limited upside

The 3 months correlation between Taylor and Cincinnati is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Taylor Maritime Investments 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 Taylor Maritime 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 Taylor Maritime Investments 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 Taylor Maritime i.e., Taylor Maritime and Cincinnati Financial go up and down completely randomly.

Pair Corralation between Taylor Maritime and Cincinnati Financial

Assuming the 90 days trading horizon Taylor Maritime Investments is expected to generate 0.92 times more return on investment than Cincinnati Financial. However, Taylor Maritime Investments is 1.09 times less risky than Cincinnati Financial. It trades about -0.02 of its potential returns per unit of risk. Cincinnati Financial Corp is currently generating about -0.03 per unit of risk. If you would invest  7,698  in Taylor Maritime Investments on October 26, 2024 and sell it today you would lose (238.00) from holding Taylor Maritime Investments or give up 3.09% of portfolio value over 90 days.

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

Taylor Maritime Investments  vs.  Cincinnati Financial Corp

Taylor Maritime Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taylor Maritime Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Taylor Maritime is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cincinnati Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cincinnati Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cincinnati Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Taylor Maritime and Cincinnati Financial

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

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.