Correlation Between Eagle Materials and HANOVER INSURANCE
Can any of the company-specific risk be diversified away by investing in both Eagle Materials 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 Eagle Materials and HANOVER INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Materials and HANOVER INSURANCE, you can compare the effects of market volatilities on Eagle Materials 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 Eagle Materials with a short position of HANOVER INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and HANOVER INSURANCE.
Diversification Opportunities for Eagle Materials and HANOVER INSURANCE
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Eagle and HANOVER is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE and Eagle Materials 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 Eagle Materials 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 Eagle Materials i.e., Eagle Materials and HANOVER INSURANCE go up and down completely randomly.
Pair Corralation between Eagle Materials and HANOVER INSURANCE
Assuming the 90 days horizon Eagle Materials is expected to generate 1.71 times more return on investment than HANOVER INSURANCE. However, Eagle Materials is 1.71 times more volatile than HANOVER INSURANCE. It trades about 0.12 of its potential returns per unit of risk. HANOVER INSURANCE is currently generating about 0.15 per unit of risk. If you would invest 21,153 in Eagle Materials on August 29, 2024 and sell it today you would earn a total of 8,447 from holding Eagle Materials or generate 39.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eagle Materials vs. HANOVER INSURANCE
Performance |
| Timeline |
| Eagle Materials |
| HANOVER INSURANCE |
Eagle Materials and HANOVER INSURANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and HANOVER INSURANCE
The main advantage of trading using opposite Eagle Materials and HANOVER INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials 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.| Eagle Materials vs. Daikin IndustriesLtd | Eagle Materials vs. Vulcan Materials | Eagle Materials vs. Anhui Conch Cement | Eagle Materials vs. Superior Plus Corp |
| HANOVER INSURANCE vs. Apple Inc | HANOVER INSURANCE vs. Apple Inc | HANOVER INSURANCE vs. Superior Plus Corp | HANOVER INSURANCE vs. SIVERS SEMICONDUCTORS AB |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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