Correlation Between Nike and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Nike 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 Nike and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and The Hanover Insurance, you can compare the effects of market volatilities on Nike 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 Nike with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Hanover Insurance.
Diversification Opportunities for Nike and Hanover Insurance
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nike and Hanover is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Nike 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 Nike Inc 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 Nike i.e., Nike and Hanover Insurance go up and down completely randomly.
Pair Corralation between Nike and Hanover Insurance
Considering the 90-day investment horizon Nike Inc is expected to generate 1.52 times more return on investment than Hanover Insurance. However, Nike is 1.52 times more volatile than The Hanover Insurance. It trades about 0.1 of its potential returns per unit of risk. The Hanover Insurance is currently generating about -0.17 per unit of risk. If you would invest 7,621 in Nike Inc on September 12, 2024 and sell it today you would earn a total of 248.00 from holding Nike Inc or generate 3.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. The Hanover Insurance
Performance |
| Timeline |
| Nike Inc |
| Hanover Insurance |
Nike and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Hanover Insurance
The main advantage of trading using opposite Nike and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike 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 Nike Inc 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. Aeye Inc | Hanover Insurance vs. Ep Emerging Markets | Hanover Insurance vs. LiCycle Holdings Corp | Hanover Insurance vs. SEI 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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