Correlation Between United Fire and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both United Fire 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 United Fire and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Fire Group and The Hanover Insurance, you can compare the effects of market volatilities on United Fire 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 United Fire with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Hanover Insurance.
Diversification Opportunities for United Fire and Hanover Insurance
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Hanover is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding United Fire 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 United Fire 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 United Fire 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 United Fire i.e., United Fire and Hanover Insurance go up and down completely randomly.
Pair Corralation between United Fire and Hanover Insurance
Given the investment horizon of 90 days United Fire is expected to generate 1.03 times less return on investment than Hanover Insurance. In addition to that, United Fire is 1.96 times more volatile than The Hanover Insurance. It trades about 0.05 of its total potential returns per unit of risk. The Hanover Insurance is currently generating about 0.09 per unit of volatility. If you would invest 10,974 in The Hanover Insurance on August 31, 2024 and sell it today you would earn a total of 5,527 from holding The Hanover Insurance or generate 50.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Fire Group vs. The Hanover Insurance
Performance |
| Timeline |
| United Fire Group |
| Hanover Insurance |
United Fire and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Fire and Hanover Insurance
The main advantage of trading using opposite United Fire and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire 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.| United Fire vs. Donegal Group B | United Fire vs. Horace Mann Educators | United Fire vs. Donegal Group A | United Fire vs. Global Indemnity PLC |
| 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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