Correlation Between Cummins and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Cummins 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 Cummins and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cummins and The Hanover Insurance, you can compare the effects of market volatilities on Cummins 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 Cummins with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cummins and Hanover Insurance.
Diversification Opportunities for Cummins and Hanover Insurance
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cummins and Hanover is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Cummins and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Cummins 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 Cummins 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 Cummins i.e., Cummins and Hanover Insurance go up and down completely randomly.
Pair Corralation between Cummins and Hanover Insurance
Assuming the 90 days horizon Cummins is expected to generate 0.99 times more return on investment than Hanover Insurance. However, Cummins is 1.01 times less risky than Hanover Insurance. It trades about 0.1 of its potential returns per unit of risk. The Hanover Insurance is currently generating about -0.15 per unit of risk. If you would invest 34,435 in Cummins on September 15, 2024 and sell it today you would earn a total of 905.00 from holding Cummins or generate 2.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Cummins vs. The Hanover Insurance
Performance |
| Timeline |
| Cummins |
| Hanover Insurance |
Cummins and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cummins and Hanover Insurance
The main advantage of trading using opposite Cummins and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cummins 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.| Cummins vs. The Hanover Insurance | Cummins vs. GALENA MINING LTD | Cummins vs. United Insurance Holdings | Cummins vs. Japan Post Insurance |
| Hanover Insurance vs. The Peoples Insurance | Hanover Insurance vs. W R Berkley | Hanover Insurance vs. ZhongAn Online P |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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