Correlation Between Cincinnati Financial and Postal Svgs

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

Diversification Opportunities for Cincinnati Financial and Postal Svgs

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Cincinnati and Postal is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Postal Svgs Bk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Svgs Bk 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 Postal Svgs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Svgs Bk has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Postal Svgs go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Postal Svgs

Given the investment horizon of 90 days Cincinnati Financial is expected to generate 1.2 times less return on investment than Postal Svgs. But when comparing it to its historical volatility, Cincinnati Financial is 2.07 times less risky than Postal Svgs. It trades about 0.04 of its potential returns per unit of risk. Postal Svgs Bk is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,098  in Postal Svgs Bk on May 18, 2022 and sell it today you would earn a total of  145.00  from holding Postal Svgs Bk or generate 13.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Cincinnati Financial  vs.  Postal Svgs Bk

 Performance (%) 
       Timeline  
Cincinnati Financial 
Cincinnati Performance
0 of 100
Over the last 90 days Cincinnati Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in September 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cincinnati Price Channel

Postal Svgs Bk 
Postal Performance
0 of 100
Over the last 90 days Postal Svgs Bk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Postal Price Channel

Cincinnati Financial and Postal Svgs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cincinnati Financial and Postal Svgs

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

Postal Svgs Bk

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Postal Svgs as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Postal Svgs' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Postal Svgs' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Postal Svgs Bk.
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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