Correlation Between CNA Financial and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both CNA 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 CNA 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 CNA Financial and The Hanover Insurance, you can compare the effects of market volatilities on CNA 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 CNA Financial with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNA Financial and Hanover Insurance.
Diversification Opportunities for CNA Financial and Hanover Insurance
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CNA and Hanover is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding CNA 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 CNA 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 CNA 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 CNA Financial i.e., CNA Financial and Hanover Insurance go up and down completely randomly.
Pair Corralation between CNA Financial and Hanover Insurance
Considering the 90-day investment horizon CNA Financial is expected to generate 1.94 times less return on investment than Hanover Insurance. But when comparing it to its historical volatility, CNA Financial is 1.14 times less risky than Hanover Insurance. It trades about 0.08 of its potential returns per unit of risk. The Hanover Insurance is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 12,893 in The Hanover Insurance on August 24, 2024 and sell it today you would earn a total of 3,381 from holding The Hanover Insurance or generate 26.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
CNA Financial vs. The Hanover Insurance
Performance |
| Timeline |
| CNA Financial |
| Hanover Insurance |
CNA Financial and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CNA Financial and Hanover Insurance
The main advantage of trading using opposite CNA Financial and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNA 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.| CNA Financial vs. Small Cap Core | CNA Financial vs. FitLife Brands, Common | CNA Financial vs. Mutual Of America | CNA Financial vs. Gfl Environmental Holdings |
| 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 CEOs Directory module to screen CEOs from public companies around the world.
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