Correlation Between METHODE ELECTRONICS and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both METHODE ELECTRONICS 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 METHODE ELECTRONICS and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METHODE ELECTRONICS and The Hanover Insurance, you can compare the effects of market volatilities on METHODE ELECTRONICS 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 METHODE ELECTRONICS with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of METHODE ELECTRONICS and Hanover Insurance.
Diversification Opportunities for METHODE ELECTRONICS and Hanover Insurance
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between METHODE and Hanover is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding METHODE ELECTRONICS and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and METHODE ELECTRONICS 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 METHODE ELECTRONICS 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 METHODE ELECTRONICS i.e., METHODE ELECTRONICS and Hanover Insurance go up and down completely randomly.
Pair Corralation between METHODE ELECTRONICS and Hanover Insurance
Assuming the 90 days trading horizon METHODE ELECTRONICS is expected to generate 2.53 times more return on investment than Hanover Insurance. However, METHODE ELECTRONICS is 2.53 times more volatile than The Hanover Insurance. It trades about 0.11 of its potential returns per unit of risk. The Hanover Insurance is currently generating about 0.27 per unit of risk. If you would invest 895.00 in METHODE ELECTRONICS on August 25, 2024 and sell it today you would earn a total of 80.00 from holding METHODE ELECTRONICS or generate 8.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
METHODE ELECTRONICS vs. The Hanover Insurance
Performance |
| Timeline |
| METHODE ELECTRONICS |
| Hanover Insurance |
METHODE ELECTRONICS and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with METHODE ELECTRONICS and Hanover Insurance
The main advantage of trading using opposite METHODE ELECTRONICS and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METHODE ELECTRONICS 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.| METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc |
| Hanover Insurance vs. The Peoples Insurance | Hanover Insurance vs. W R Berkley | Hanover Insurance vs. Loews Corp |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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