Correlation Between Merit Medical and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Merit Medical 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 Merit Medical and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merit Medical Systems and The Hanover Insurance, you can compare the effects of market volatilities on Merit Medical 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 Merit Medical with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Hanover Insurance.
Diversification Opportunities for Merit Medical and Hanover Insurance
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merit and Hanover is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Merit Medical 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 Merit Medical Systems 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 Merit Medical i.e., Merit Medical and Hanover Insurance go up and down completely randomly.
Pair Corralation between Merit Medical and Hanover Insurance
Given the investment horizon of 90 days Merit Medical is expected to generate 1.02 times less return on investment than Hanover Insurance. But when comparing it to its historical volatility, Merit Medical Systems is 1.01 times less risky than Hanover Insurance. It trades about 0.28 of its potential returns per unit of risk. The Hanover Insurance is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 14,915 in The Hanover Insurance on August 29, 2024 and sell it today you would earn a total of 1,389 from holding The Hanover Insurance or generate 9.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. The Hanover Insurance
Performance |
| Timeline |
| Merit Medical Systems |
| Hanover Insurance |
Merit Medical and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Hanover Insurance
The main advantage of trading using opposite Merit Medical and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical 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 Merit Medical Systems 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. Fiverr International | Hanover Insurance vs. Pinterest | Hanover Insurance vs. Upstart Holdings | Hanover Insurance vs. Fastly Inc |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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