Correlation Between UST Inc and CNA Financial

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

By analyzing existing cross correlation between ProShares Ultra 7 10 and CNA Financial, you can compare the effects of market volatilities on UST Inc and CNA 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 UST Inc with a short position of CNA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of UST Inc and CNA Financial.

Diversification Opportunities for UST Inc and CNA Financial

0.67

Correlation Coefficient

UST Inc  CNA Financial

Poor diversification

The 3 months correlation between UST and CNA is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra 7 10 and CNA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNA Financial and UST Inc 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 ProShares Ultra 7 10 are associated (or correlated) with CNA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNA Financial has no effect on the direction of UST Inc i.e., UST Inc and CNA Financial go up and down completely randomly.

Pair Corralation between UST Inc and CNA Financial

Considering the 90-day investment horizon UST Inc is expected to generate 7.52 times less return on investment than CNA Financial. But when comparing it to its historical volatility, ProShares Ultra 7 10 is 1.37 times less risky than CNA Financial. It trades about 0.01 of its potential returns per unit of risk. CNA Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,205  in CNA Financial on December 2, 2024 and sell it today you would earn a total of  692.00  from holding CNA Financial or generate 16.46% return on investment over 90 days.

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

ProShares Ultra 7 10  vs.  CNA Financial

ProShares Ultra 7

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra 7 10 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, UST Inc is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

CNA Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days CNA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CNA Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with UST Inc and CNA Financial

The main advantage of trading using opposite UST Inc and CNA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UST Inc position performs unexpectedly, CNA 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 CNA Financial will offset losses from the drop in CNA Financial's long position.

The idea behind ProShares Ultra 7 10 and CNA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.