Correlation Between Fairfax Financial and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial 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 Fairfax Financial and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fairfax Financial Holdings and The Hanover Insurance, you can compare the effects of market volatilities on Fairfax Financial 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 Fairfax Financial with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Hanover Insurance.
Diversification Opportunities for Fairfax Financial and Hanover Insurance
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Hanover is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Fairfax Financial 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 Fairfax Financial Holdings 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 Fairfax Financial i.e., Fairfax Financial and Hanover Insurance go up and down completely randomly.
Pair Corralation between Fairfax Financial and Hanover Insurance
If you would invest 14,915 in The Hanover Insurance on August 27, 2024 and sell it today you would earn a total of 1,445 from holding The Hanover Insurance or generate 9.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. The Hanover Insurance
Performance |
| Timeline |
| Fairfax Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Hanover Insurance |
Fairfax Financial and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Hanover Insurance
The main advantage of trading using opposite Fairfax Financial and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial 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.| Fairfax Financial vs. RLI Corp | Fairfax Financial vs. Chubb | Fairfax Financial vs. Progressive Corp | Fairfax Financial vs. White Mountains Insurance |
| 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 CEOs Directory module to screen CEOs from public companies around the world.
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