Correlation Between Hanover Insurance and KAUFMAN ET
Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and KAUFMAN ET 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 KAUFMAN ET into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Hanover Insurance and KAUFMAN ET BROAD, you can compare the effects of market volatilities on Hanover Insurance and KAUFMAN ET 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 KAUFMAN ET. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and KAUFMAN ET.
Diversification Opportunities for Hanover Insurance and KAUFMAN ET
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hanover and KAUFMAN is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and KAUFMAN ET BROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAUFMAN ET BROAD 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 The Hanover Insurance are associated (or correlated) with KAUFMAN ET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAUFMAN ET BROAD has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and KAUFMAN ET go up and down completely randomly.
Pair Corralation between Hanover Insurance and KAUFMAN ET
Assuming the 90 days horizon Hanover Insurance is expected to generate 1.67 times less return on investment than KAUFMAN ET. But when comparing it to its historical volatility, The Hanover Insurance is 1.27 times less risky than KAUFMAN ET. It trades about 0.03 of its potential returns per unit of risk. KAUFMAN ET BROAD is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,305 in KAUFMAN ET BROAD on August 27, 2024 and sell it today you would earn a total of 905.00 from holding KAUFMAN ET BROAD or generate 39.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Hanover Insurance vs. KAUFMAN ET BROAD
Performance |
| Timeline |
| Hanover Insurance |
| KAUFMAN ET BROAD |
Hanover Insurance and KAUFMAN ET Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanover Insurance and KAUFMAN ET
The main advantage of trading using opposite Hanover Insurance and KAUFMAN ET positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, KAUFMAN ET 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 KAUFMAN ET will offset losses from the drop in KAUFMAN ET's long position.| Hanover Insurance vs. BOSTON BEER A | Hanover Insurance vs. China Resources Beer | Hanover Insurance vs. KINGBOARD CHEMICAL | Hanover Insurance vs. ScanSource |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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