Correlation Between HANOVER INSURANCE and Coca Cola
Can any of the company-specific risk be diversified away by investing in both HANOVER INSURANCE and Coca Cola 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 Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HANOVER INSURANCE and Coca Cola Consolidated, you can compare the effects of market volatilities on HANOVER INSURANCE and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of HANOVER INSURANCE and Coca Cola.
Diversification Opportunities for HANOVER INSURANCE and Coca Cola
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HANOVER and Coca is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding HANOVER INSURANCE and Coca Cola Consolidated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Consolidated 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola Consolidated has no effect on the direction of HANOVER INSURANCE i.e., HANOVER INSURANCE and Coca Cola go up and down completely randomly.
Pair Corralation between HANOVER INSURANCE and Coca Cola
Assuming the 90 days trading horizon HANOVER INSURANCE is expected to generate 0.7 times more return on investment than Coca Cola. However, HANOVER INSURANCE is 1.43 times less risky than Coca Cola. It trades about 0.14 of its potential returns per unit of risk. Coca Cola Consolidated is currently generating about 0.05 per unit of risk. If you would invest 12,815 in HANOVER INSURANCE on September 12, 2024 and sell it today you would earn a total of 1,685 from holding HANOVER INSURANCE or generate 13.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
HANOVER INSURANCE vs. Coca Cola Consolidated
Performance |
| Timeline |
| HANOVER INSURANCE |
| Coca Cola Consolidated |
HANOVER INSURANCE and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HANOVER INSURANCE and Coca Cola
The main advantage of trading using opposite HANOVER INSURANCE and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HANOVER INSURANCE position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.| HANOVER INSURANCE vs. Apple Inc | HANOVER INSURANCE vs. Apple Inc | HANOVER INSURANCE vs. Apple Inc | HANOVER INSURANCE vs. Apple Inc |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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