Correlation Between Encore Capital and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Encore Capital 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 Encore Capital and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Encore Capital Group and The Hanover Insurance, you can compare the effects of market volatilities on Encore Capital 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 Encore Capital with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Hanover Insurance.
Diversification Opportunities for Encore Capital and Hanover Insurance
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Encore and Hanover is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Encore Capital 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 Encore Capital Group 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 Encore Capital i.e., Encore Capital and Hanover Insurance go up and down completely randomly.
Pair Corralation between Encore Capital and Hanover Insurance
Given the investment horizon of 90 days Encore Capital Group is expected to generate 0.96 times more return on investment than Hanover Insurance. However, Encore Capital Group is 1.04 times less risky than Hanover Insurance. It trades about 0.18 of its potential returns per unit of risk. The Hanover Insurance is currently generating about 0.07 per unit of risk. If you would invest 4,676 in Encore Capital Group on October 23, 2024 and sell it today you would earn a total of 209.00 from holding Encore Capital Group or generate 4.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. The Hanover Insurance
Performance |
| Timeline |
| Encore Capital Group |
| Hanover Insurance |
Encore Capital and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and Hanover Insurance
The main advantage of trading using opposite Encore Capital and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital 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.| Encore Capital vs. Guild Holdings Co | Encore Capital vs. Mr Cooper Group | Encore Capital vs. CNFinance Holdings | Encore Capital vs. Security National Financial |
| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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