Correlation Between JD Sports and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both JD Sports 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 JD Sports and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JD Sports Fashion and The Hanover Insurance, you can compare the effects of market volatilities on JD Sports 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 JD Sports with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and Hanover Insurance.
Diversification Opportunities for JD Sports and Hanover Insurance
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between JDDSF and Hanover is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and JD Sports 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 JD Sports Fashion 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 JD Sports i.e., JD Sports and Hanover Insurance go up and down completely randomly.
Pair Corralation between JD Sports and Hanover Insurance
Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Hanover Insurance. In addition to that, JD Sports is 3.06 times more volatile than The Hanover Insurance. It trades about -0.22 of its total potential returns per unit of risk. The Hanover Insurance is currently generating about 0.44 per unit of volatility. If you would invest 14,714 in The Hanover Insurance on September 3, 2024 and sell it today you would earn a total of 1,787 from holding The Hanover Insurance or generate 12.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JD Sports Fashion vs. The Hanover Insurance
Performance |
| Timeline |
| JD Sports Fashion |
| Hanover Insurance |
JD Sports and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD Sports and Hanover Insurance
The main advantage of trading using opposite JD Sports and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports 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.| JD Sports vs. Guess Inc | JD Sports vs. Foot Locker | JD Sports vs. JPMorgan Chase Co | JD Sports vs. Home Depot |
| 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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