Correlation Between EDISON INTL and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both EDISON INTL 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 EDISON INTL and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EDISON INTL and The Hanover Insurance, you can compare the effects of market volatilities on EDISON INTL 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 EDISON INTL with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDISON INTL and Hanover Insurance.
Diversification Opportunities for EDISON INTL and Hanover Insurance
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between EDISON and Hanover is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding EDISON INTL and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and EDISON INTL 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 EDISON INTL 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 EDISON INTL i.e., EDISON INTL and Hanover Insurance go up and down completely randomly.
Pair Corralation between EDISON INTL and Hanover Insurance
Assuming the 90 days trading horizon EDISON INTL is expected to under-perform the Hanover Insurance. But the stock apears to be less risky and, when comparing its historical volatility, EDISON INTL is 1.18 times less risky than Hanover Insurance. The stock trades about -0.01 of its potential returns per unit of risk. The The Hanover Insurance is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 11,219 in The Hanover Insurance on December 6, 2024 and sell it today you would earn a total of 5,081 from holding The Hanover Insurance or generate 45.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
EDISON INTL vs. The Hanover Insurance
Performance |
| Timeline |
| EDISON INTL |
| Hanover Insurance |
EDISON INTL and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EDISON INTL and Hanover Insurance
The main advantage of trading using opposite EDISON INTL and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDISON INTL 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.| EDISON INTL vs. GOLDQUEST MINING | EDISON INTL vs. Air Lease | EDISON INTL vs. MINCO SILVER | EDISON INTL vs. Major Drilling Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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