Correlation Between RAYTHEON and Cincinnati Financial

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

By analyzing existing cross correlation between RAYTHEON 315 percent and Cincinnati Financial, you can compare the effects of market volatilities on RAYTHEON 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 RAYTHEON with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of RAYTHEON and Cincinnati Financial.

Diversification Opportunities for RAYTHEON and Cincinnati Financial

0.43

Correlation Coefficient

RAYTHEON  Cincinnati Financial

Very weak diversification

The 3 months correlation between RAYTHEON and Cincinnati is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding RAYTHEON 315 percent and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and RAYTHEON 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 RAYTHEON 315 percent 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 RAYTHEON i.e., RAYTHEON and Cincinnati Financial go up and down completely randomly.

Pair Corralation between RAYTHEON and Cincinnati Financial

Assuming the 90 days trading horizon RAYTHEON 315 percent is expected to under-perform the Cincinnati Financial. But the bond apears to be less risky and, when comparing its historical volatility, RAYTHEON 315 percent is 1.41 times less risky than Cincinnati Financial. The bond trades about -0.37 of its potential returns per unit of risk. The Cincinnati Financial is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  15,031  in Cincinnati Financial on October 11, 2024 and sell it today you would lose (860.00) from holding Cincinnati Financial or give up 5.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	24.39%
Values	Daily Returns

RAYTHEON 315 percent  vs.  Cincinnati Financial

RAYTHEON 315 percent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RAYTHEON 315 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for RAYTHEON 315 percent investors.

Cincinnati Financial

Risk-Adjusted Performance

4 of 100

Insignificant

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 RAYTHEON and Cincinnati Financial

The main advantage of trading using opposite RAYTHEON and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RAYTHEON 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 RAYTHEON 315 percent 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.