Correlation Between Hanover Insurance and HCI
Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and HCI 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 Hanover Insurance and HCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Hanover Insurance and HCI Group, you can compare the effects of market volatilities on Hanover Insurance and HCI 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 Hanover Insurance with a short position of HCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and HCI.
Diversification Opportunities for Hanover Insurance and HCI
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hanover and HCI is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and HCI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCI Group and Hanover 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 The Hanover Insurance are associated (or correlated) with HCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCI Group has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and HCI go up and down completely randomly.
Pair Corralation between Hanover Insurance and HCI
Considering the 90-day investment horizon The Hanover Insurance is expected to generate 0.76 times more return on investment than HCI. However, The Hanover Insurance is 1.32 times less risky than HCI. It trades about 0.27 of its potential returns per unit of risk. HCI Group is currently generating about -0.07 per unit of risk. If you would invest 14,915 in The Hanover Insurance on August 27, 2024 and sell it today you would earn a total of 1,258 from holding The Hanover Insurance or generate 8.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Hanover Insurance vs. HCI Group
Performance |
| Timeline |
| Hanover Insurance |
| HCI Group |
Hanover Insurance and HCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanover Insurance and HCI
The main advantage of trading using opposite Hanover Insurance and HCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, HCI 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 HCI will offset losses from the drop in HCI's long position.| Hanover Insurance vs. Horace Mann Educators | Hanover Insurance vs. Kemper | Hanover Insurance vs. RLI Corp | Hanover Insurance vs. Global Indemnity PLC |
| HCI vs. Universal Insurance Holdings | HCI vs. Kingstone Companies | HCI vs. Horace Mann Educators | HCI vs. Heritage Insurance Hldgs |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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