Correlation Between Hanover Insurance and DiamondRock Hospitality
Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and DiamondRock Hospitality 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 DiamondRock Hospitality 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 DiamondRock Hospitality, you can compare the effects of market volatilities on Hanover Insurance and DiamondRock Hospitality 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 DiamondRock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and DiamondRock Hospitality.
Diversification Opportunities for Hanover Insurance and DiamondRock Hospitality
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hanover and DiamondRock is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and DiamondRock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiamondRock Hospitality 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 DiamondRock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiamondRock Hospitality has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and DiamondRock Hospitality go up and down completely randomly.
Pair Corralation between Hanover Insurance and DiamondRock Hospitality
Assuming the 90 days horizon The Hanover Insurance is expected to generate 0.42 times more return on investment than DiamondRock Hospitality. However, The Hanover Insurance is 2.38 times less risky than DiamondRock Hospitality. It trades about 0.09 of its potential returns per unit of risk. DiamondRock Hospitality is currently generating about 0.03 per unit of risk. If you would invest 10,332 in The Hanover Insurance on August 31, 2024 and sell it today you would earn a total of 5,468 from holding The Hanover Insurance or generate 52.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.74% |
| Values | Daily Returns |
The Hanover Insurance vs. DiamondRock Hospitality
Performance |
| Timeline |
| Hanover Insurance |
| DiamondRock Hospitality |
Hanover Insurance and DiamondRock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanover Insurance and DiamondRock Hospitality
The main advantage of trading using opposite Hanover Insurance and DiamondRock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, DiamondRock Hospitality 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 DiamondRock Hospitality will offset losses from the drop in DiamondRock Hospitality's long position.| Hanover Insurance vs. Pentair plc | Hanover Insurance vs. AIR LIQUIDE ADR | Hanover Insurance vs. Norwegian Air Shuttle | Hanover Insurance vs. Computer And Technologies |
| DiamondRock Hospitality vs. Sotherly Hotels | DiamondRock Hospitality vs. Superior Plus Corp | DiamondRock Hospitality vs. NMI Holdings | DiamondRock Hospitality vs. Origin Agritech |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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