Correlation Between Lendlease and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Lendlease 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 Lendlease and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lendlease Group and The Hanover Insurance, you can compare the effects of market volatilities on Lendlease 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 Lendlease with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lendlease and Hanover Insurance.
Diversification Opportunities for Lendlease and Hanover Insurance
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lendlease and Hanover is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lendlease Group and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Lendlease 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 Lendlease Group 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 Lendlease i.e., Lendlease and Hanover Insurance go up and down completely randomly.
Pair Corralation between Lendlease and Hanover Insurance
Assuming the 90 days trading horizon Lendlease is expected to generate 4.33 times less return on investment than Hanover Insurance. But when comparing it to its historical volatility, Lendlease Group is 1.23 times less risky than Hanover Insurance. It trades about 0.1 of its potential returns per unit of risk. The Hanover Insurance is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 13,600 in The Hanover Insurance on August 29, 2024 and sell it today you would earn a total of 1,900 from holding The Hanover Insurance or generate 13.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lendlease Group vs. The Hanover Insurance
Performance |
| Timeline |
| Lendlease Group |
| Hanover Insurance |
Lendlease and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lendlease and Hanover Insurance
The main advantage of trading using opposite Lendlease and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lendlease 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.The idea behind Lendlease Group and The Hanover Insurance 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.| Hanover Insurance vs. Samsung Electronics Co | Hanover Insurance vs. Corporate Office Properties | Hanover Insurance vs. ARROW ELECTRONICS | Hanover Insurance vs. KENEDIX OFFICE INV |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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