Correlation Between Cincinnati Financial and Rems Real

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

By analyzing existing cross correlation between Cincinnati Financial and Rems Real Estate, you can compare the effects of market volatilities on Cincinnati Financial and Rems Real 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 Rems Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Rems Real.

Diversification Opportunities for Cincinnati Financial and Rems Real

-0.25

Correlation Coefficient

Cincinnati Financial  Rems Real

Very good diversification

The 3 months correlation between Cincinnati and Rems is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Rems Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rems Real Estate 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 Rems Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rems Real Estate has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Rems Real go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Rems Real

Given the investment horizon of 90 days Cincinnati Financial is expected to generate 1.13 times more return on investment than Rems Real. However, Cincinnati Financial is 1.13 times more volatile than Rems Real Estate. It trades about 0.1 of its potential returns per unit of risk. Rems Real Estate is currently generating about 0.01 per unit of risk. If you would invest  9,356  in Cincinnati Financial on January 24, 2024 and sell it today you would earn a total of  2,740  from holding Cincinnati Financial or generate 29.29% return on investment over 90 days.

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

Cincinnati Financial  vs.  Rems Real Estate

Cincinnati Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Cincinnati Financial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Rems Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rems Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Rems Real is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cincinnati Financial and Rems Real

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

The idea behind Cincinnati Financial and Rems Real Estate 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.