Correlation Between Software Circle and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Software Circle and Cincinnati Financial 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 Software Circle and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Software Circle plc and Cincinnati Financial Corp, you can compare the effects of market volatilities on Software Circle and Cincinnati Financial 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 Software Circle with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Software Circle and Cincinnati Financial.
Diversification Opportunities for Software Circle and Cincinnati Financial
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Software and Cincinnati is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc and Cincinnati Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial Corp and Software Circle 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 Software Circle plc are associated (or correlated) with Cincinnati Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cincinnati Financial Corp has no effect on the direction of Software Circle i.e., Software Circle and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Software Circle and Cincinnati Financial
Assuming the 90 days trading horizon Software Circle is expected to generate 2.78 times less return on investment than Cincinnati Financial. In addition to that, Software Circle is 1.84 times more volatile than Cincinnati Financial Corp. It trades about 0.04 of its total potential returns per unit of risk. Cincinnati Financial Corp is currently generating about 0.19 per unit of volatility. If you would invest 13,069 in Cincinnati Financial Corp on April 22, 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 | Significant |
Accuracy | 98.44% |
Values | Daily Returns |
Software Circle plc vs. Cincinnati Financial Corp
Performance |
Timeline |
Software Circle plc |
Cincinnati Financial Corp |
Software Circle and Cincinnati Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Software Circle and Cincinnati Financial
The main advantage of trading using opposite Software Circle and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Software Circle position performs unexpectedly, Cincinnati Financial 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 Cincinnati Financial will offset losses from the drop in Cincinnati Financial's long position.Software Circle vs. Samsung Electronics Co | Software Circle vs. Global Net Lease | Software Circle vs. Ross Stores | Software Circle vs. National Beverage Corp |
Cincinnati Financial vs. Hollywood Bowl Group | Cincinnati Financial vs. Intermediate Capital Group | Cincinnati Financial vs. Catena Media PLC | Cincinnati Financial vs. Prosiebensat 1 Media |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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