Correlation Between Hanover Insurance and BRIT AMER
Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and BRIT AMER 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 BRIT AMER 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 BRIT AMER TOBACCO, you can compare the effects of market volatilities on Hanover Insurance and BRIT AMER 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 BRIT AMER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and BRIT AMER.
Diversification Opportunities for Hanover Insurance and BRIT AMER
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hanover and BRIT is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and BRIT AMER TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRIT AMER TOBACCO 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 BRIT AMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRIT AMER TOBACCO has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and BRIT AMER go up and down completely randomly.
Pair Corralation between Hanover Insurance and BRIT AMER
Assuming the 90 days horizon Hanover Insurance is expected to generate 2.33 times less return on investment than BRIT AMER. In addition to that, Hanover Insurance is 1.28 times more volatile than BRIT AMER TOBACCO. It trades about 0.06 of its total potential returns per unit of risk. BRIT AMER TOBACCO is currently generating about 0.18 per unit of volatility. If you would invest 3,187 in BRIT AMER TOBACCO on September 22, 2024 and sell it today you would earn a total of 295.00 from holding BRIT AMER TOBACCO or generate 9.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Hanover Insurance vs. BRIT AMER TOBACCO
Performance |
| Timeline |
| Hanover Insurance |
| BRIT AMER TOBACCO |
Hanover Insurance and BRIT AMER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanover Insurance and BRIT AMER
The main advantage of trading using opposite Hanover Insurance and BRIT AMER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, BRIT AMER 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 BRIT AMER will offset losses from the drop in BRIT AMER's long position.| Hanover Insurance vs. Air Lease | Hanover Insurance vs. SLR Investment Corp | Hanover Insurance vs. Virtus Investment Partners | Hanover Insurance vs. Jacquet Metal Service |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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