Correlation Between Microsoft and HANOVER INSURANCE
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and HANOVER INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and HANOVER INSURANCE, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of HANOVER INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and HANOVER INSURANCE.
Diversification Opportunities for Microsoft and HANOVER INSURANCE
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and HANOVER is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and HANOVER INSURANCE go up and down completely randomly.
Pair Corralation between Microsoft and HANOVER INSURANCE
Assuming the 90 days trading horizon Microsoft is expected to generate 0.94 times more return on investment than HANOVER INSURANCE. However, Microsoft is 1.06 times less risky than HANOVER INSURANCE. It trades about 0.13 of its potential returns per unit of risk. HANOVER INSURANCE is currently generating about -0.11 per unit of risk. If you would invest 40,700 in Microsoft on September 27, 2024 and sell it today you would earn a total of 1,130 from holding Microsoft or generate 2.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. HANOVER INSURANCE
Performance |
| Timeline |
| Microsoft |
| HANOVER INSURANCE |
Microsoft and HANOVER INSURANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and HANOVER INSURANCE
The main advantage of trading using opposite Microsoft and HANOVER INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Ultra Clean Holdings | Microsoft vs. DXC Technology Co | Microsoft vs. HK Electric Investments | Microsoft vs. WisdomTree Investments |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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