Correlation Between HANOVER INSURANCE and BP Prudhoe
Can any of the company-specific risk be diversified away by investing in both HANOVER INSURANCE and BP Prudhoe 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 BP Prudhoe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HANOVER INSURANCE and BP Prudhoe Bay, you can compare the effects of market volatilities on HANOVER INSURANCE and BP Prudhoe 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 BP Prudhoe. Check out your portfolio center. Please also check ongoing floating volatility patterns of HANOVER INSURANCE and BP Prudhoe.
Diversification Opportunities for HANOVER INSURANCE and BP Prudhoe
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between HANOVER and BMI is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding HANOVER INSURANCE and BP Prudhoe Bay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP Prudhoe Bay 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 BP Prudhoe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP Prudhoe Bay has no effect on the direction of HANOVER INSURANCE i.e., HANOVER INSURANCE and BP Prudhoe go up and down completely randomly.
Pair Corralation between HANOVER INSURANCE and BP Prudhoe
Assuming the 90 days trading horizon HANOVER INSURANCE is expected to generate 3.64 times less return on investment than BP Prudhoe. But when comparing it to its historical volatility, HANOVER INSURANCE is 3.29 times less risky than BP Prudhoe. It trades about 0.08 of its potential returns per unit of risk. BP Prudhoe Bay is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 49.00 in BP Prudhoe Bay on November 27, 2024 and sell it today you would earn a total of 4.00 from holding BP Prudhoe Bay or generate 8.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HANOVER INSURANCE vs. BP Prudhoe Bay
Performance |
| Timeline |
| HANOVER INSURANCE |
| BP Prudhoe Bay |
HANOVER INSURANCE and BP Prudhoe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HANOVER INSURANCE and BP Prudhoe
The main advantage of trading using opposite HANOVER INSURANCE and BP Prudhoe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HANOVER INSURANCE position performs unexpectedly, BP Prudhoe 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 BP Prudhoe will offset losses from the drop in BP Prudhoe's long position.| HANOVER INSURANCE vs. SOLSTAD OFFSHORE NK | HANOVER INSURANCE vs. Eidesvik Offshore ASA | HANOVER INSURANCE vs. URBAN OUTFITTERS | HANOVER INSURANCE vs. EIDESVIK OFFSHORE NK |
| BP Prudhoe vs. Check Point Software | BP Prudhoe vs. FLOW TRADERS LTD | BP Prudhoe vs. SIDETRADE EO 1 | BP Prudhoe vs. ASM Pacific Technology |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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