Correlation Between Hanover Insurance and X FAB
Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and X FAB 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 X FAB 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 X FAB Silicon Foundries, you can compare the effects of market volatilities on Hanover Insurance and X FAB 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 X FAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and X FAB.
Diversification Opportunities for Hanover Insurance and X FAB
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hanover and XFB is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and X FAB go up and down completely randomly.
Pair Corralation between Hanover Insurance and X FAB
Assuming the 90 days horizon The Hanover Insurance is expected to generate 0.62 times more return on investment than X FAB. However, The Hanover Insurance is 1.61 times less risky than X FAB. It trades about 0.03 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.01 per unit of risk. If you would invest 12,182 in The Hanover Insurance on September 17, 2024 and sell it today you would earn a total of 2,418 from holding The Hanover Insurance or generate 19.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Hanover Insurance vs. X FAB Silicon Foundries
Performance |
| Timeline |
| Hanover Insurance |
| X FAB Silicon |
Hanover Insurance and X FAB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanover Insurance and X FAB
The main advantage of trading using opposite Hanover Insurance and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, X FAB 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 X FAB will offset losses from the drop in X FAB's long position.The idea behind The Hanover Insurance and X FAB Silicon Foundries 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.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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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