Correlation Between Cincinnati Financial and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial 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 Cincinnati Financial and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and The Hanover Insurance, you can compare the effects of market volatilities on Cincinnati Financial 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 Cincinnati Financial with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Hanover Insurance.
Diversification Opportunities for Cincinnati Financial and Hanover Insurance
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cincinnati and Hanover is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Cincinnati Financial 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 Cincinnati Financial 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 Cincinnati Financial i.e., Cincinnati Financial and Hanover Insurance go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Hanover Insurance
Given the investment horizon of 90 days Cincinnati Financial is expected to generate 1.3 times more return on investment than Hanover Insurance. However, Cincinnati Financial is 1.3 times more volatile than The Hanover Insurance. It trades about 0.43 of its potential returns per unit of risk. The Hanover Insurance is currently generating about 0.44 per unit of risk. If you would invest 13,819 in Cincinnati Financial on September 3, 2024 and sell it today you would earn a total of 2,164 from holding Cincinnati Financial or generate 15.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial vs. The Hanover Insurance
Performance |
| Timeline |
| Cincinnati Financial |
| Hanover Insurance |
Cincinnati Financial and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Hanover Insurance
The main advantage of trading using opposite Cincinnati Financial and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial 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.| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. The Travelers Companies | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. W R Berkley |
| 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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