Correlation Between Hanover Insurance and Novo Nordisk

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Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and Novo Nordisk 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 Novo Nordisk 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 Novo Nordisk AS, you can compare the effects of market volatilities on Hanover Insurance and Novo Nordisk 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 Novo Nordisk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and Novo Nordisk.

Diversification Opportunities for Hanover Insurance and Novo Nordisk

-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Hanover and Novo is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and Novo Nordisk AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novo Nordisk AS 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 Novo Nordisk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novo Nordisk AS has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Novo Nordisk go up and down completely randomly.

Pair Corralation between Hanover Insurance and Novo Nordisk

Assuming the 90 days horizon The Hanover Insurance is expected to generate 0.94 times more return on investment than Novo Nordisk. However, The Hanover Insurance is 1.07 times less risky than Novo Nordisk. It trades about 0.15 of its potential returns per unit of risk. Novo Nordisk AS is currently generating about 0.04 per unit of risk. If you would invest  14,300  in The Hanover Insurance on November 28, 2024 and sell it today you would earn a total of  1,100  from holding The Hanover Insurance or generate 7.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

The Hanover Insurance  vs.  Novo Nordisk AS

 Performance 
       Timeline  
Hanover Insurance 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hanover Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Novo Nordisk AS 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Novo Nordisk AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Hanover Insurance and Novo Nordisk Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hanover Insurance and Novo Nordisk

The main advantage of trading using opposite Hanover Insurance and Novo Nordisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, Novo Nordisk 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 Novo Nordisk will offset losses from the drop in Novo Nordisk's long position.
The idea behind The Hanover Insurance and Novo Nordisk AS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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