Correlation Between Cincinnati Financial and IQ Hedge

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

Diversification Opportunities for Cincinnati Financial and IQ Hedge

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Cincinnati and IQ Hedge is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and IQ Hedge Multi-Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ Hedge Multi-Strategy 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 IQ Hedge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ Hedge Multi-Strategy has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and IQ Hedge go up and down completely randomly.

Pair Corralation between Cincinnati Financial and IQ Hedge

Given the investment horizon of 90 days Cincinnati Financial is expected to generate 5.11 times more return on investment than IQ Hedge. However, Cincinnati Financial is 5.11 times more volatile than IQ Hedge Multi-Strategy. It trades about 0.05 of its potential returns per unit of risk. IQ Hedge Multi-Strategy is currently generating about -0.01 per unit of risk. If you would invest  7,244  in Cincinnati Financial on May 13, 2022 and sell it today you would earn a total of  3,072  from holding Cincinnati Financial or generate 42.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Cincinnati Financial  vs.  IQ Hedge Multi-Strategy

 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 abnormal 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

IQ Hedge Multi-Strategy 
IQ Hedge Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in IQ Hedge Multi-Strategy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IQ Hedge is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

IQ Hedge Price Channel

Cincinnati Financial and IQ Hedge Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cincinnati Financial and IQ Hedge

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

Cincinnati Financial

Pair trading matchups for Cincinnati Financial

The idea behind Cincinnati Financial and IQ Hedge Multi-Strategy 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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