Correlation Between Hanover Insurance and Western Acquisition
Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and Western Acquisition 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 Western Acquisition 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 Western Acquisition Ventures, you can compare the effects of market volatilities on Hanover Insurance and Western Acquisition 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 Western Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and Western Acquisition.
Diversification Opportunities for Hanover Insurance and Western Acquisition
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Hanover and Western is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition 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 Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Western Acquisition go up and down completely randomly.
Pair Corralation between Hanover Insurance and Western Acquisition
Considering the 90-day investment horizon The Hanover Insurance is expected to generate 0.78 times more return on investment than Western Acquisition. However, The Hanover Insurance is 1.28 times less risky than Western Acquisition. It trades about 0.04 of its potential returns per unit of risk. Western Acquisition Ventures is currently generating about 0.02 per unit of risk. If you would invest 13,215 in The Hanover Insurance on August 30, 2024 and sell it today you would earn a total of 3,212 from holding The Hanover Insurance or generate 24.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Hanover Insurance vs. Western Acquisition Ventures
Performance |
| Timeline |
| Hanover Insurance |
| Western Acquisition |
Hanover Insurance and Western Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanover Insurance and Western Acquisition
The main advantage of trading using opposite Hanover Insurance and Western Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, Western Acquisition 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 Western Acquisition will offset losses from the drop in Western Acquisition's long position.| Hanover Insurance vs. Axa Equitable Holdings | Hanover Insurance vs. American International Group | Hanover Insurance vs. Arch Capital Group | Hanover Insurance vs. Sun Life Financial |
| Western Acquisition vs. ClimateRock Class A | Western Acquisition vs. CF Acquisition VII | Western Acquisition vs. DP Cap Acquisition |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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