Correlation Between Hanover Insurance and BP Plc
Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and BP Plc 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 Plc 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 BP plc, you can compare the effects of market volatilities on Hanover Insurance and BP Plc 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 Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and BP Plc.
Diversification Opportunities for Hanover Insurance and BP Plc
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hanover and BSU is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc 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 BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and BP Plc go up and down completely randomly.
Pair Corralation between Hanover Insurance and BP Plc
Assuming the 90 days horizon The Hanover Insurance is expected to generate 1.11 times more return on investment than BP Plc. However, Hanover Insurance is 1.11 times more volatile than BP plc. It trades about 0.38 of its potential returns per unit of risk. BP plc is currently generating about 0.14 per unit of risk. If you would invest 13,700 in The Hanover Insurance on September 1, 2024 and sell it today you would earn a total of 2,100 from holding The Hanover Insurance or generate 15.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Hanover Insurance vs. BP plc
Performance |
| Timeline |
| Hanover Insurance |
| BP plc |
Hanover Insurance and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanover Insurance and BP Plc
The main advantage of trading using opposite Hanover Insurance and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, BP Plc 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 Plc will offset losses from the drop in BP Plc's long position.| Hanover Insurance vs. National Beverage Corp | Hanover Insurance vs. United Breweries Co | Hanover Insurance vs. Sabra Health Care | Hanover Insurance vs. Clearside Biomedical |
| BP Plc vs. Siamgas And Petrochemicals | BP Plc vs. Granite Construction | BP Plc vs. Performance Food Group | BP Plc vs. NIPPON MEAT PACKERS |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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