Correlation Between Highway Holdings and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Highway Holdings 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 Highway Holdings and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highway Holdings Limited and The Hanover Insurance, you can compare the effects of market volatilities on Highway Holdings 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 Highway Holdings with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and Hanover Insurance.
Diversification Opportunities for Highway Holdings and Hanover Insurance
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Highway and Hanover is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Highway Holdings 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 Highway Holdings Limited 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 Highway Holdings i.e., Highway Holdings and Hanover Insurance go up and down completely randomly.
Pair Corralation between Highway Holdings and Hanover Insurance
Given the investment horizon of 90 days Highway Holdings is expected to generate 5.55 times less return on investment than Hanover Insurance. In addition to that, Highway Holdings is 2.18 times more volatile than The Hanover Insurance. It trades about 0.01 of its total potential returns per unit of risk. The Hanover Insurance is currently generating about 0.09 per unit of volatility. If you would invest 10,974 in The Hanover Insurance on August 31, 2024 and sell it today you would earn a total of 5,527 from holding The Hanover Insurance or generate 50.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
Highway Holdings Limited vs. The Hanover Insurance
Performance |
| Timeline |
| Highway Holdings |
| Hanover Insurance |
Highway Holdings and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highway Holdings and Hanover Insurance
The main advantage of trading using opposite Highway Holdings and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings 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.| Highway Holdings vs. Deswell Industries | Highway Holdings vs. Euro Tech Holdings | Highway Holdings vs. China Natural Resources | Highway Holdings vs. Arts Way Manufacturing Co |
| 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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