Correlation Between Cincinnati Financial and NetSol Technologies

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Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and NetSol Technologies 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 NetSol Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and NetSol Technologies, you can compare the effects of market volatilities on Cincinnati Financial and NetSol Technologies 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 NetSol Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and NetSol Technologies.

Diversification Opportunities for Cincinnati Financial and NetSol Technologies

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Cincinnati and NetSol is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and NetSol Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetSol Technologies 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 NetSol Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetSol Technologies has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and NetSol Technologies go up and down completely randomly.

Pair Corralation between Cincinnati Financial and NetSol Technologies

Given the investment horizon of 90 days Cincinnati Financial is expected to generate 0.67 times more return on investment than NetSol Technologies. However, Cincinnati Financial is 1.5 times less risky than NetSol Technologies. It trades about -0.03 of its potential returns per unit of risk. NetSol Technologies is currently generating about -0.13 per unit of risk. If you would invest  11,860  in Cincinnati Financial on January 20, 2024 and sell it today you would lose (108.00) from holding Cincinnati Financial or give up 0.91% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Cincinnati Financial  vs.  NetSol Technologies

 Performance 
       Timeline  
Cincinnati Financial 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
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 current stock price disturbance, may contribute to mid-run losses for the stockholders.
NetSol Technologies 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NetSol Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, NetSol Technologies disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cincinnati Financial and NetSol Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cincinnati Financial and NetSol Technologies

The main advantage of trading using opposite Cincinnati Financial and NetSol Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, NetSol Technologies 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 NetSol Technologies will offset losses from the drop in NetSol Technologies' long position.
The idea behind Cincinnati Financial and NetSol Technologies 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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