Correlation Between China Water and HANOVER INSURANCE
Can any of the company-specific risk be diversified away by investing in both China Water 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 China Water and HANOVER INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Water Affairs and HANOVER INSURANCE, you can compare the effects of market volatilities on China Water 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 China Water with a short position of HANOVER INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Water and HANOVER INSURANCE.
Diversification Opportunities for China Water and HANOVER INSURANCE
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and HANOVER is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding China Water Affairs and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE and China Water 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 China Water Affairs 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 China Water i.e., China Water and HANOVER INSURANCE go up and down completely randomly.
Pair Corralation between China Water and HANOVER INSURANCE
Assuming the 90 days trading horizon China Water Affairs is expected to generate 3.18 times more return on investment than HANOVER INSURANCE. However, China Water is 3.18 times more volatile than HANOVER INSURANCE. It trades about 0.08 of its potential returns per unit of risk. HANOVER INSURANCE is currently generating about 0.1 per unit of risk. If you would invest 27.00 in China Water Affairs on September 4, 2024 and sell it today you would earn a total of 26.00 from holding China Water Affairs or generate 96.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Water Affairs vs. HANOVER INSURANCE
Performance |
| Timeline |
| China Water Affairs |
| HANOVER INSURANCE |
China Water and HANOVER INSURANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Water and HANOVER INSURANCE
The main advantage of trading using opposite China Water and HANOVER INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Water 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.| China Water vs. RETAIL FOOD GROUP | China Water vs. KINGBOARD CHEMICAL | China Water vs. Fast Retailing Co | China Water vs. SCANSOURCE |
| HANOVER INSURANCE vs. TOTAL GABON | HANOVER INSURANCE vs. Walgreens Boots Alliance | HANOVER INSURANCE vs. Peak Resources Limited |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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