Correlation Between Arrow Electronics and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Arrow Electronics 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 Arrow Electronics and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Electronics and The Hanover Insurance, you can compare the effects of market volatilities on Arrow Electronics 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 Arrow Electronics with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and Hanover Insurance.
Diversification Opportunities for Arrow Electronics and Hanover Insurance
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Arrow and Hanover is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Arrow Electronics 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 Arrow Electronics 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 Arrow Electronics i.e., Arrow Electronics and Hanover Insurance go up and down completely randomly.
Pair Corralation between Arrow Electronics and Hanover Insurance
Considering the 90-day investment horizon Arrow Electronics is expected to under-perform the Hanover Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Arrow Electronics is 1.12 times less risky than Hanover Insurance. The stock trades about -0.2 of its potential returns per unit of risk. The The Hanover Insurance is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 15,628 in The Hanover Insurance on November 18, 2024 and sell it today you would earn a total of 638.00 from holding The Hanover Insurance or generate 4.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arrow Electronics vs. The Hanover Insurance
Performance |
| Timeline |
| Arrow Electronics |
| Hanover Insurance |
Arrow Electronics and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow Electronics and Hanover Insurance
The main advantage of trading using opposite Arrow Electronics and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics 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.| Arrow Electronics vs. Insight Enterprises | Arrow Electronics vs. Synnex | Arrow Electronics vs. Climb Global Solutions | Arrow Electronics vs. ScanSource |
| Hanover Insurance vs. Horace Mann Educators | Hanover Insurance vs. Kemper | Hanover Insurance vs. RLI Corp | Hanover Insurance vs. Global Indemnity PLC |
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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