Correlation Between HANOVER INSURANCE and Universal Insurance
Can any of the company-specific risk be diversified away by investing in both HANOVER INSURANCE and Universal 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 HANOVER INSURANCE and Universal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HANOVER INSURANCE and Universal Insurance Holdings, you can compare the effects of market volatilities on HANOVER INSURANCE and Universal 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 HANOVER INSURANCE with a short position of Universal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of HANOVER INSURANCE and Universal Insurance.
Diversification Opportunities for HANOVER INSURANCE and Universal Insurance
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HANOVER and Universal is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding HANOVER INSURANCE and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and HANOVER INSURANCE 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 HANOVER INSURANCE are associated (or correlated) with Universal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Insurance has no effect on the direction of HANOVER INSURANCE i.e., HANOVER INSURANCE and Universal Insurance go up and down completely randomly.
Pair Corralation between HANOVER INSURANCE and Universal Insurance
Assuming the 90 days trading horizon HANOVER INSURANCE is expected to generate 0.5 times more return on investment than Universal Insurance. However, HANOVER INSURANCE is 1.98 times less risky than Universal Insurance. It trades about 0.15 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.06 per unit of risk. If you would invest 11,832 in HANOVER INSURANCE on August 25, 2024 and sell it today you would earn a total of 3,368 from holding HANOVER INSURANCE or generate 28.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HANOVER INSURANCE vs. Universal Insurance Holdings
Performance |
| Timeline |
| HANOVER INSURANCE |
| Universal Insurance |
HANOVER INSURANCE and Universal Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HANOVER INSURANCE and Universal Insurance
The main advantage of trading using opposite HANOVER INSURANCE and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HANOVER INSURANCE position performs unexpectedly, Universal 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 Universal Insurance will offset losses from the drop in Universal Insurance's long position.| HANOVER INSURANCE vs. SCANSOURCE | HANOVER INSURANCE vs. FIREWEED METALS P | HANOVER INSURANCE vs. MOLSON RS BEVERAGE | HANOVER INSURANCE vs. THAI BEVERAGE |
| Universal Insurance vs. QBE Insurance Group | Universal Insurance vs. Insurance Australia Group | Universal Insurance vs. Superior Plus Corp | Universal Insurance vs. NMI Holdings |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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