Correlation Between JAPAN TOBACCO and HANOVER INSURANCE
Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO 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 JAPAN TOBACCO and HANOVER INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN TOBACCO UNSPADR12 and HANOVER INSURANCE, you can compare the effects of market volatilities on JAPAN TOBACCO 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 JAPAN TOBACCO with a short position of HANOVER INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and HANOVER INSURANCE.
Diversification Opportunities for JAPAN TOBACCO and HANOVER INSURANCE
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between JAPAN and HANOVER is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE and JAPAN TOBACCO 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 JAPAN TOBACCO UNSPADR12 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 JAPAN TOBACCO i.e., JAPAN TOBACCO and HANOVER INSURANCE go up and down completely randomly.
Pair Corralation between JAPAN TOBACCO and HANOVER INSURANCE
Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to generate 0.65 times more return on investment than HANOVER INSURANCE. However, JAPAN TOBACCO UNSPADR12 is 1.53 times less risky than HANOVER INSURANCE. It trades about -0.19 of its potential returns per unit of risk. HANOVER INSURANCE is currently generating about -0.2 per unit of risk. If you would invest 1,260 in JAPAN TOBACCO UNSPADR12 on September 25, 2024 and sell it today you would lose (40.00) from holding JAPAN TOBACCO UNSPADR12 or give up 3.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAPAN TOBACCO UNSPADR12 vs. HANOVER INSURANCE
Performance |
| Timeline |
| JAPAN TOBACCO UNSPADR12 |
| HANOVER INSURANCE |
JAPAN TOBACCO and HANOVER INSURANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN TOBACCO and HANOVER INSURANCE
The main advantage of trading using opposite JAPAN TOBACCO and HANOVER INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO 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.| JAPAN TOBACCO vs. Philip Morris International | JAPAN TOBACCO vs. Philip Morris International | JAPAN TOBACCO vs. British American Tobacco | JAPAN TOBACCO vs. British American Tobacco |
| HANOVER INSURANCE vs. Apple Inc | HANOVER INSURANCE vs. Apple Inc | HANOVER INSURANCE vs. Microsoft | HANOVER INSURANCE vs. Microsoft |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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