Correlation Between Waste Management and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and The Hanover Insurance, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Hanover Insurance.
Diversification Opportunities for Waste Management and Hanover Insurance
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Waste and Hanover is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Hanover Insurance go up and down completely randomly.
Pair Corralation between Waste Management and Hanover Insurance
Allowing for the 90-day total investment horizon Waste Management is expected to generate 1.01 times less return on investment than Hanover Insurance. In addition to that, Waste Management is 1.0 times more volatile than The Hanover Insurance. It trades about 0.28 of its total potential returns per unit of risk. The Hanover Insurance is currently generating about 0.29 per unit of volatility. If you would invest 14,915 in The Hanover Insurance on August 29, 2024 and sell it today you would earn a total of 1,389 from holding The Hanover Insurance or generate 9.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. The Hanover Insurance
Performance |
| Timeline |
| Waste Management |
| Hanover Insurance |
Waste Management and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Hanover Insurance
The main advantage of trading using opposite Waste Management and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. Genpact Limited | Waste Management vs. Broadridge Financial Solutions | Waste Management vs. First Advantage Corp | Waste Management vs. Franklin Covey |
| Hanover Insurance vs. Fiverr International | Hanover Insurance vs. Pinterest | Hanover Insurance vs. Upstart Holdings | Hanover Insurance vs. Fastly Inc |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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