Correlation Between VARIOUS EATERIES and Hanover Insurance

Can any of the company-specific risk be diversified away by investing in both VARIOUS EATERIES 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 VARIOUS EATERIES and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VARIOUS EATERIES LS and The Hanover Insurance, you can compare the effects of market volatilities on VARIOUS EATERIES 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 VARIOUS EATERIES with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of VARIOUS EATERIES and Hanover Insurance.

Diversification Opportunities for VARIOUS EATERIES and Hanover Insurance

0.48

Correlation Coefficient

VARIOUS EATERIES  Hanover Insurance

Very weak diversification

The 3 months correlation between VARIOUS and Hanover is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding VARIOUS EATERIES LS and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and VARIOUS EATERIES 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 VARIOUS EATERIES LS 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 VARIOUS EATERIES i.e., VARIOUS EATERIES and Hanover Insurance go up and down completely randomly.

Pair Corralation between VARIOUS EATERIES and Hanover Insurance

Assuming the 90 days horizon VARIOUS EATERIES LS is expected to under-perform the Hanover Insurance. In addition to that, VARIOUS EATERIES is 1.03 times more volatile than The Hanover Insurance. It trades about -0.04 of its total potential returns per unit of risk. The Hanover Insurance is currently generating about 0.16 per unit of volatility. If you would invest  11,832  in The Hanover Insurance on September 1, 2024 and sell it today you would earn a total of  3,968  from holding The Hanover Insurance or generate 33.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

VARIOUS EATERIES LS  vs.  The Hanover Insurance

VARIOUS EATERIES

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VARIOUS EATERIES LS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, VARIOUS EATERIES is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Hanover Insurance

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hanover Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VARIOUS EATERIES and Hanover Insurance

The main advantage of trading using opposite VARIOUS EATERIES and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VARIOUS EATERIES 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 VARIOUS EATERIES LS and The 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.

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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.