Correlation Between Hannover and Greenlight Capital
Can any of the company-specific risk be diversified away by investing in both Hannover and Greenlight Capital 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 Hannover and Greenlight Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hannover Re and Greenlight Capital Re, you can compare the effects of market volatilities on Hannover and Greenlight Capital 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 Hannover with a short position of Greenlight Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hannover and Greenlight Capital.
Diversification Opportunities for Hannover and Greenlight Capital
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hannover and Greenlight is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Hannover Re and Greenlight Capital Re in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenlight Capital and Hannover 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 Hannover Re are associated (or correlated) with Greenlight Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenlight Capital has no effect on the direction of Hannover i.e., Hannover and Greenlight Capital go up and down completely randomly.
Pair Corralation between Hannover and Greenlight Capital
Assuming the 90 days horizon Hannover Re is expected to under-perform the Greenlight Capital. But the pink sheet apears to be less risky and, when comparing its historical volatility, Hannover Re is 2.19 times less risky than Greenlight Capital. The pink sheet trades about -0.23 of its potential returns per unit of risk. The Greenlight Capital Re is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,346 in Greenlight Capital Re on August 24, 2024 and sell it today you would earn a total of 154.00 from holding Greenlight Capital Re or generate 11.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Hannover Re vs. Greenlight Capital Re
Performance |
| Timeline |
| Hannover Re |
| Greenlight Capital |
Hannover and Greenlight Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hannover and Greenlight Capital
The main advantage of trading using opposite Hannover and Greenlight Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hannover position performs unexpectedly, Greenlight Capital 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 Greenlight Capital will offset losses from the drop in Greenlight Capital's long position.The idea behind Hannover Re and Greenlight Capital Re pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Greenlight Capital vs. Reinsurance Group of | Greenlight Capital vs. Siriuspoint | Greenlight Capital vs. SCOR PK | Greenlight Capital vs. SiriusPoint |
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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