Correlation Between Versarien PLC and Cincinnati Financial

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

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

Diversification Opportunities for Versarien PLC and Cincinnati Financial

-0.42

Correlation Coefficient

Versarien PLC  Cincinnati Financial

Very good diversification

The 3 months correlation between Versarien and Cincinnati is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Versarien PLC 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 Versarien PLC 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 Versarien PLC 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 Versarien PLC i.e., Versarien PLC and Cincinnati Financial go up and down completely randomly.

Pair Corralation between Versarien PLC and Cincinnati Financial

Assuming the 90 days trading horizon Versarien PLC is expected to generate 3.23 times more return on investment than Cincinnati Financial. However, Versarien PLC is 3.23 times more volatile than Cincinnati Financial Corp. It trades about 0.04 of its potential returns per unit of risk. Cincinnati Financial Corp is currently generating about -0.13 per unit of risk. If you would invest  3.30  in Versarien PLC on November 28, 2024 and sell it today you would earn a total of  0.14  from holding Versarien PLC or generate 4.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Versarien PLC  vs.  Cincinnati Financial Corp

Versarien PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Versarien PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Versarien PLC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cincinnati Financial Corp

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Versarien PLC and Cincinnati Financial

The main advantage of trading using opposite Versarien PLC and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Versarien PLC 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 Versarien PLC 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 Transaction History module to view history of all your transactions and understand their impact on performance.