Correlation Between Air Transport and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Air Transport 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 Air Transport and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Transport Services and The Hanover Insurance, you can compare the effects of market volatilities on Air Transport 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 Air Transport with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Hanover Insurance.
Diversification Opportunities for Air Transport and Hanover Insurance
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Air and Hanover is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and Hanover Insurance go up and down completely randomly.
Pair Corralation between Air Transport and Hanover Insurance
Assuming the 90 days horizon Air Transport Services is expected to generate 3.23 times more return on investment than Hanover Insurance. However, Air Transport is 3.23 times more volatile than The Hanover Insurance. It trades about 0.29 of its potential returns per unit of risk. The Hanover Insurance is currently generating about 0.37 per unit of risk. If you would invest 1,540 in Air Transport Services on August 29, 2024 and sell it today you would earn a total of 560.00 from holding Air Transport Services or generate 36.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. The Hanover Insurance
Performance |
| Timeline |
| Air Transport Services |
| Hanover Insurance |
Air Transport and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and Hanover Insurance
The main advantage of trading using opposite Air Transport and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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.| Air Transport vs. Aena SME SA | Air Transport vs. Superior Plus Corp | Air Transport vs. NMI Holdings | Air Transport vs. SIVERS SEMICONDUCTORS AB |
| Hanover Insurance vs. Tokio Marine Holdings | Hanover Insurance vs. The Peoples Insurance | Hanover Insurance vs. Beazley 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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