Correlation Between Cincinnati Financial and Aegon NV

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

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

Diversification Opportunities for Cincinnati Financial and Aegon NV

0.16

Correlation Coefficient

Cincinnati Financial  Aegon NV

Average diversification

The 3 months correlation between Cincinnati and Aegon is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Aegon NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon NV ADR and Cincinnati Financial 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 Cincinnati Financial are associated (or correlated) with Aegon NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon NV ADR has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Aegon NV go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Aegon NV

Given the investment horizon of 90 days Cincinnati Financial is expected to generate 2.15 times less return on investment than Aegon NV. In addition to that, Cincinnati Financial is 1.21 times more volatile than Aegon NV ADR. It trades about 0.07 of its total potential returns per unit of risk. Aegon NV ADR is currently generating about 0.17 per unit of volatility. If you would invest  567.00  in Aegon NV ADR on March 5, 2024 and sell it today you would earn a total of  79.00  from holding Aegon NV ADR or generate 13.93% return on investment over 90 days.

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

Cincinnati Financial  vs.  Aegon NV ADR

Cincinnati Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 5 (%) 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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Aegon NV ADR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aegon NV ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Aegon NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cincinnati Financial and Aegon NV

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

The idea behind Cincinnati Financial and Aegon NV ADR 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.