Correlation Between TFS FINANCIAL and HANOVER INSURANCE
Can any of the company-specific risk be diversified away by investing in both TFS FINANCIAL 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 TFS FINANCIAL and HANOVER INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TFS FINANCIAL and HANOVER INSURANCE, you can compare the effects of market volatilities on TFS FINANCIAL 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 TFS FINANCIAL with a short position of HANOVER INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of TFS FINANCIAL and HANOVER INSURANCE.
Diversification Opportunities for TFS FINANCIAL and HANOVER INSURANCE
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TFS and HANOVER is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE and TFS FINANCIAL 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 TFS FINANCIAL 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 TFS FINANCIAL i.e., TFS FINANCIAL and HANOVER INSURANCE go up and down completely randomly.
Pair Corralation between TFS FINANCIAL and HANOVER INSURANCE
Assuming the 90 days trading horizon TFS FINANCIAL is expected to generate 1.33 times less return on investment than HANOVER INSURANCE. In addition to that, TFS FINANCIAL is 1.19 times more volatile than HANOVER INSURANCE. It trades about 0.1 of its total potential returns per unit of risk. HANOVER INSURANCE is currently generating about 0.15 per unit of volatility. If you would invest 11,635 in HANOVER INSURANCE on August 29, 2024 and sell it today you would earn a total of 3,465 from holding HANOVER INSURANCE or generate 29.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TFS FINANCIAL vs. HANOVER INSURANCE
Performance |
| Timeline |
| TFS FINANCIAL |
| HANOVER INSURANCE |
TFS FINANCIAL and HANOVER INSURANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TFS FINANCIAL and HANOVER INSURANCE
The main advantage of trading using opposite TFS FINANCIAL and HANOVER INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFS FINANCIAL 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.| TFS FINANCIAL vs. Apple Inc | TFS FINANCIAL vs. Apple Inc | TFS FINANCIAL vs. Microsoft | TFS FINANCIAL vs. Microsoft |
| HANOVER INSURANCE vs. Apple Inc | HANOVER INSURANCE vs. Apple Inc | HANOVER INSURANCE vs. Microsoft | HANOVER INSURANCE vs. Microsoft |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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