Correlation Between Hanover Insurance and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and Selective 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 Hanover Insurance and Selective Insurance 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 Selective Insurance Group, you can compare the effects of market volatilities on Hanover Insurance and Selective 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 Hanover Insurance with a short position of Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and Selective Insurance.
Diversification Opportunities for Hanover Insurance and Selective Insurance
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hanover and Selective is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Selective Insurance go up and down completely randomly.
Pair Corralation between Hanover Insurance and Selective Insurance
Considering the 90-day investment horizon The Hanover Insurance is expected to generate 0.77 times more return on investment than Selective Insurance. However, The Hanover Insurance is 1.29 times less risky than Selective Insurance. It trades about 0.06 of its potential returns per unit of risk. Selective Insurance Group is currently generating about 0.02 per unit of risk. If you would invest 12,395 in The Hanover Insurance on August 24, 2024 and sell it today you would earn a total of 3,965 from holding The Hanover Insurance or generate 31.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Hanover Insurance vs. Selective Insurance Group
Performance |
| Timeline |
| Hanover Insurance |
| Selective Insurance |
Hanover Insurance and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanover Insurance and Selective Insurance
The main advantage of trading using opposite Hanover Insurance and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, Selective 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 Selective Insurance will offset losses from the drop in Selective Insurance's long position.| Hanover Insurance vs. Horace Mann Educators | Hanover Insurance vs. Kemper | Hanover Insurance vs. RLI Corp | Hanover Insurance vs. Global Indemnity PLC |
| Selective Insurance vs. Kemper | Selective Insurance vs. Donegal Group B | Selective Insurance vs. Argo Group International | Selective 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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