Correlation Between Hanover Insurance and Safety Insurance
Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and Safety Insurance 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 Safety Insurance 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 Safety Insurance Group, you can compare the effects of market volatilities on Hanover Insurance and Safety Insurance 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 Safety Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and Safety Insurance.
Diversification Opportunities for Hanover Insurance and Safety Insurance
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hanover and Safety is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and Safety Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Insurance 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 Safety Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Insurance has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Safety Insurance go up and down completely randomly.
Pair Corralation between Hanover Insurance and Safety Insurance
Assuming the 90 days horizon The Hanover Insurance is expected to generate 0.94 times more return on investment than Safety Insurance. However, The Hanover Insurance is 1.06 times less risky than Safety Insurance. It trades about 0.37 of its potential returns per unit of risk. Safety Insurance Group is currently generating about 0.27 per unit of risk. If you would invest 13,600 in The Hanover Insurance on August 29, 2024 and sell it today you would earn a total of 1,900 from holding The Hanover Insurance or generate 13.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
The Hanover Insurance vs. Safety Insurance Group
Performance |
| Timeline |
| Hanover Insurance |
| Safety Insurance |
Hanover Insurance and Safety Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanover Insurance and Safety Insurance
The main advantage of trading using opposite Hanover Insurance and Safety Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, Safety Insurance 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 Safety Insurance will offset losses from the drop in Safety Insurance's long position.| Hanover Insurance vs. Tokio Marine Holdings | Hanover Insurance vs. The Peoples Insurance | Hanover Insurance vs. Beazley PLC |
| Safety Insurance vs. PICC Property and | Safety Insurance vs. QBE Insurance Group | Safety Insurance vs. Superior Plus Corp | Safety Insurance vs. SIVERS SEMICONDUCTORS AB |
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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