Correlation Between Cincinnati Financial and Aurora Investment

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

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

Diversification Opportunities for Cincinnati Financial and Aurora Investment

0.88

Correlation Coefficient

Cincinnati Financial  Aurora Investment

Very poor diversification

The 3 months correlation between Cincinnati and Aurora is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Aurora Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Investment Trust 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 Corp are associated (or correlated) with Aurora Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Investment Trust has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Aurora Investment go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Aurora Investment

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to generate 1.2 times more return on investment than Aurora Investment. However, Cincinnati Financial is 1.2 times more volatile than Aurora Investment Trust. It trades about 0.19 of its potential returns per unit of risk. Aurora Investment Trust is currently generating about 0.1 per unit of risk. If you would invest  13,069  in Cincinnati Financial Corp on April 20, 2025 and sell it today you would earn a total of  1,903  from holding Cincinnati Financial Corp or generate 14.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Cincinnati Financial Corp  vs.  Aurora Investment Trust

Cincinnati Financial Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cincinnati Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aurora Investment Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Investment Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Aurora Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cincinnati Financial and Aurora Investment

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

The idea behind Cincinnati Financial Corp and Aurora Investment Trust 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 Commodity Directory module to find actively traded commodities issued by global exchanges.