Correlation Between X FAB and HANOVER INSURANCE
Can any of the company-specific risk be diversified away by investing in both X FAB 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 X FAB and HANOVER INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between X FAB Silicon Foundries and HANOVER INSURANCE, you can compare the effects of market volatilities on X FAB 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 X FAB with a short position of HANOVER INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and HANOVER INSURANCE.
Diversification Opportunities for X FAB and HANOVER INSURANCE
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between XFB and HANOVER is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE and X FAB 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 X FAB Silicon Foundries 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 X FAB i.e., X FAB and HANOVER INSURANCE go up and down completely randomly.
Pair Corralation between X FAB and HANOVER INSURANCE
Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 2.28 times more return on investment than HANOVER INSURANCE. However, X FAB is 2.28 times more volatile than HANOVER INSURANCE. It trades about 0.22 of its potential returns per unit of risk. HANOVER INSURANCE is currently generating about -0.07 per unit of risk. If you would invest 437.00 in X FAB Silicon Foundries on September 16, 2024 and sell it today you would earn a total of 60.00 from holding X FAB Silicon Foundries or generate 13.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
X FAB Silicon Foundries vs. HANOVER INSURANCE
Performance |
| Timeline |
| X FAB Silicon |
| HANOVER INSURANCE |
X FAB and HANOVER INSURANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X FAB and HANOVER INSURANCE
The main advantage of trading using opposite X FAB and HANOVER INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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.The idea behind X FAB Silicon Foundries and HANOVER INSURANCE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| HANOVER INSURANCE vs. Apple Inc | HANOVER INSURANCE vs. Apple Inc | HANOVER INSURANCE vs. Apple Inc | HANOVER INSURANCE vs. Apple 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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