Correlation Between Cincinnati Financial and Automatic Data

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

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

Diversification Opportunities for Cincinnati Financial and Automatic Data

-0.57

Correlation Coefficient

Cincinnati Financial  Automatic Data

Excellent diversification

The 3 months correlation between Cincinnati and Automatic is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Automatic Data go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Automatic Data

Assuming the 90 days trading horizon Cincinnati Financial is expected to generate 0.18 times more return on investment than Automatic Data. However, Cincinnati Financial is 5.41 times less risky than Automatic Data. It trades about 0.13 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.0 per unit of risk. If you would invest  40,499  in Cincinnati Financial on April 24, 2025 and sell it today you would earn a total of  955.00  from holding Cincinnati Financial or generate 2.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Cincinnati Financial  vs.  Automatic Data Processing

Cincinnati Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cincinnati Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Automatic Data Processing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Automatic Data Processing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Automatic Data is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cincinnati Financial and Automatic Data

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

The idea behind Cincinnati Financial and Automatic Data Processing 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.