Correlation Between Safety Insurance and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Safety Insurance 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 Safety Insurance and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Safety Insurance Group and The Hanover Insurance, you can compare the effects of market volatilities on Safety Insurance 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 Safety Insurance with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safety Insurance and Hanover Insurance.
Diversification Opportunities for Safety Insurance and Hanover Insurance
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Safety and Hanover is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Safety Insurance 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 Safety Insurance Group 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 Safety Insurance i.e., Safety Insurance and Hanover Insurance go up and down completely randomly.
Pair Corralation between Safety Insurance and Hanover Insurance
Assuming the 90 days horizon Safety Insurance is expected to generate 1.29 times less return on investment than Hanover Insurance. In addition to that, Safety Insurance is 1.06 times more volatile than The Hanover Insurance. It trades about 0.27 of its total potential returns per unit of risk. The Hanover Insurance is currently generating about 0.37 per unit of volatility. If you would invest 13,600 in The Hanover Insurance on August 29, 2024 and sell it today you would earn a total of 1,900 from holding The Hanover Insurance or generate 13.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Safety Insurance Group vs. The Hanover Insurance
Performance |
| Timeline |
| Safety Insurance |
| Hanover Insurance |
Safety Insurance and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Safety Insurance and Hanover Insurance
The main advantage of trading using opposite Safety Insurance and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Insurance 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.| Safety Insurance vs. PICC Property and | Safety Insurance vs. QBE Insurance Group | Safety Insurance vs. Superior Plus Corp | Safety Insurance vs. SIVERS SEMICONDUCTORS AB |
| Hanover Insurance vs. Tokio Marine Holdings | Hanover Insurance vs. The Peoples Insurance | Hanover Insurance vs. Beazley 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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