Correlation Between Advanced Medical and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Advanced Medical and Hanover 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 Advanced Medical and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Medical Solutions and The Hanover Insurance, you can compare the effects of market volatilities on Advanced Medical and Hanover 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 Advanced Medical with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Medical and Hanover Insurance.
Diversification Opportunities for Advanced Medical and Hanover Insurance
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Advanced and Hanover is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Advanced Medical 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 Advanced Medical Solutions are associated (or correlated) with Hanover Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Insurance has no effect on the direction of Advanced Medical i.e., Advanced Medical and Hanover Insurance go up and down completely randomly.
Pair Corralation between Advanced Medical and Hanover Insurance
Assuming the 90 days trading horizon Advanced Medical is expected to generate 1.18 times less return on investment than Hanover Insurance. In addition to that, Advanced Medical is 2.12 times more volatile than The Hanover Insurance. It trades about 0.15 of its total potential returns per unit of risk. The Hanover Insurance is currently generating about 0.38 per unit of volatility. If you would invest 13,600 in The Hanover Insurance on August 28, 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 Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Medical Solutions vs. The Hanover Insurance
Performance |
| Timeline |
| Advanced Medical Sol |
| Hanover Insurance |
Advanced Medical and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Medical and Hanover Insurance
The main advantage of trading using opposite Advanced Medical and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Medical position performs unexpectedly, Hanover 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 Hanover Insurance will offset losses from the drop in Hanover Insurance's long position.| Advanced Medical vs. Apple Inc | Advanced Medical vs. Apple Inc | Advanced Medical vs. Apple Inc | Advanced Medical vs. Apple Inc |
| Hanover Insurance vs. BOSTON BEER A | Hanover Insurance vs. China Resources Beer | Hanover Insurance vs. KINGBOARD CHEMICAL | Hanover Insurance vs. ScanSource |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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