Correlation Between Hanover Insurance and SOUTHWEST AIRLINES
Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and SOUTHWEST AIRLINES 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 SOUTHWEST AIRLINES 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 SOUTHWEST AIRLINES, you can compare the effects of market volatilities on Hanover Insurance and SOUTHWEST AIRLINES 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 SOUTHWEST AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and SOUTHWEST AIRLINES.
Diversification Opportunities for Hanover Insurance and SOUTHWEST AIRLINES
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hanover and SOUTHWEST is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and SOUTHWEST AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHWEST AIRLINES 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 SOUTHWEST AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUTHWEST AIRLINES has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and SOUTHWEST AIRLINES go up and down completely randomly.
Pair Corralation between Hanover Insurance and SOUTHWEST AIRLINES
Assuming the 90 days horizon The Hanover Insurance is expected to generate 0.72 times more return on investment than SOUTHWEST AIRLINES. However, The Hanover Insurance is 1.39 times less risky than SOUTHWEST AIRLINES. It trades about 0.03 of its potential returns per unit of risk. SOUTHWEST AIRLINES is currently generating about 0.02 per unit of risk. If you would invest 11,993 in The Hanover Insurance on September 26, 2024 and sell it today you would earn a total of 2,607 from holding The Hanover Insurance or generate 21.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Hanover Insurance vs. SOUTHWEST AIRLINES
Performance |
| Timeline |
| Hanover Insurance |
| SOUTHWEST AIRLINES |
Hanover Insurance and SOUTHWEST AIRLINES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanover Insurance and SOUTHWEST AIRLINES
The main advantage of trading using opposite Hanover Insurance and SOUTHWEST AIRLINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, SOUTHWEST AIRLINES 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 SOUTHWEST AIRLINES will offset losses from the drop in SOUTHWEST AIRLINES's long position.| Hanover Insurance vs. Tokio Marine Holdings | Hanover Insurance vs. The Peoples Insurance | Hanover Insurance vs. W R Berkley | Hanover Insurance vs. Loews Corp |
| SOUTHWEST AIRLINES vs. Ameriprise Financial | SOUTHWEST AIRLINES vs. National Bank Holdings | SOUTHWEST AIRLINES vs. Tradegate AG Wertpapierhandelsbank | SOUTHWEST AIRLINES vs. The Hanover Insurance |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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