Correlation Between Hanover Insurance and United Rentals
Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and United Rentals 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 United Rentals 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 United Rentals, you can compare the effects of market volatilities on Hanover Insurance and United Rentals 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 United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and United Rentals.
Diversification Opportunities for Hanover Insurance and United Rentals
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hanover and United is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals 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 United Rentals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and United Rentals go up and down completely randomly.
Pair Corralation between Hanover Insurance and United Rentals
Assuming the 90 days horizon The Hanover Insurance is expected to generate 0.47 times more return on investment than United Rentals. However, The Hanover Insurance is 2.11 times less risky than United Rentals. It trades about 0.27 of its potential returns per unit of risk. United Rentals is currently generating about 0.05 per unit of risk. If you would invest 13,800 in The Hanover Insurance on August 25, 2024 and sell it today you would earn a total of 1,400 from holding The Hanover Insurance or generate 10.14% 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. United Rentals
Performance |
| Timeline |
| Hanover Insurance |
| United Rentals |
Hanover Insurance and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanover Insurance and United Rentals
The main advantage of trading using opposite Hanover Insurance and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, United Rentals 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 United Rentals will offset losses from the drop in United Rentals' long position.| Hanover Insurance vs. The Peoples Insurance | Hanover Insurance vs. W R Berkley | Hanover Insurance vs. Loews Corp |
| United Rentals vs. Chuangs China Investments | United Rentals vs. KINGBOARD CHEMICAL | United Rentals vs. Gladstone Investment | United Rentals vs. China BlueChemical |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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