Correlation Between Arch Capital and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Arch Capital and Hanover Insurance 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 Arch Capital and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arch Capital Group and The Hanover Insurance, you can compare the effects of market volatilities on Arch Capital and Hanover Insurance 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 Arch Capital with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Capital and Hanover Insurance.
Diversification Opportunities for Arch Capital and Hanover Insurance
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Arch and Hanover is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Arch Capital 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 Arch Capital Group are associated (or correlated) with Hanover Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Insurance has no effect on the direction of Arch Capital i.e., Arch Capital and Hanover Insurance go up and down completely randomly.
Pair Corralation between Arch Capital and Hanover Insurance
Given the investment horizon of 90 days Arch Capital Group is expected to generate 1.12 times more return on investment than Hanover Insurance. However, Arch Capital is 1.12 times more volatile than The Hanover Insurance. It trades about 0.08 of its potential returns per unit of risk. The Hanover Insurance is currently generating about 0.04 per unit of risk. If you would invest 5,709 in Arch Capital Group on August 30, 2024 and sell it today you would earn a total of 4,365 from holding Arch Capital Group or generate 76.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Arch Capital Group vs. The Hanover Insurance
Performance |
| Timeline |
| Arch Capital Group |
| Hanover Insurance |
Arch Capital and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arch Capital and Hanover Insurance
The main advantage of trading using opposite Arch Capital and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arch Capital position performs unexpectedly, Hanover Insurance 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 Hanover Insurance will offset losses from the drop in Hanover Insurance's long position.| Arch Capital vs. Axa Equitable Holdings | Arch Capital vs. American International Group | Arch Capital vs. Old Republic International | Arch Capital vs. Sun Life Financial |
| Hanover Insurance vs. Axa Equitable Holdings | Hanover Insurance vs. American International Group | Hanover Insurance vs. Arch Capital Group | Hanover Insurance vs. Sun Life Financial |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |