Correlation Between RLI Corp and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both RLI Corp 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 RLI Corp and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RLI Corp and The Hanover Insurance, you can compare the effects of market volatilities on RLI Corp 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 RLI Corp with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLI Corp and Hanover Insurance.
Diversification Opportunities for RLI Corp and Hanover Insurance
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between RLI and Hanover is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding RLI Corp and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and RLI Corp 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 RLI Corp 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 RLI Corp i.e., RLI Corp and Hanover Insurance go up and down completely randomly.
Pair Corralation between RLI Corp and Hanover Insurance
Considering the 90-day investment horizon RLI Corp is expected to generate 1.07 times less return on investment than Hanover Insurance. But when comparing it to its historical volatility, RLI Corp is 1.1 times less risky than Hanover Insurance. It trades about 0.15 of its potential returns per unit of risk. The Hanover Insurance is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 12,893 in The Hanover Insurance on August 24, 2024 and sell it today you would earn a total of 3,381 from holding The Hanover Insurance or generate 26.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
RLI Corp vs. The Hanover Insurance
Performance |
| Timeline |
| RLI Corp |
| Hanover Insurance |
RLI Corp and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLI Corp and Hanover Insurance
The main advantage of trading using opposite RLI Corp and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLI Corp 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.| RLI Corp vs. Horace Mann Educators | RLI Corp vs. Kemper | RLI Corp vs. Global Indemnity PLC | RLI Corp vs. Argo Group International |
| Hanover Insurance vs. Horace Mann Educators | Hanover Insurance vs. Kemper | Hanover Insurance vs. RLI Corp | Hanover Insurance vs. Global Indemnity PLC |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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