Correlation Between HANOVER INSURANCE and Metro AG
Can any of the company-specific risk be diversified away by investing in both HANOVER INSURANCE and Metro AG 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 Metro AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HANOVER INSURANCE and Metro AG, you can compare the effects of market volatilities on HANOVER INSURANCE and Metro AG 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 Metro AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of HANOVER INSURANCE and Metro AG.
Diversification Opportunities for HANOVER INSURANCE and Metro AG
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HANOVER and Metro is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding HANOVER INSURANCE and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG 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 HANOVER INSURANCE are associated (or correlated) with Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of HANOVER INSURANCE i.e., HANOVER INSURANCE and Metro AG go up and down completely randomly.
Pair Corralation between HANOVER INSURANCE and Metro AG
Assuming the 90 days trading horizon HANOVER INSURANCE is expected to generate 0.44 times more return on investment than Metro AG. However, HANOVER INSURANCE is 2.25 times less risky than Metro AG. It trades about 0.09 of its potential returns per unit of risk. Metro AG is currently generating about 0.03 per unit of risk. If you would invest 12,835 in HANOVER INSURANCE on December 10, 2024 and sell it today you would earn a total of 2,265 from holding HANOVER INSURANCE or generate 17.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
HANOVER INSURANCE vs. Metro AG
Performance |
Timeline |
HANOVER INSURANCE |
Metro AG |
HANOVER INSURANCE and Metro AG Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HANOVER INSURANCE and Metro AG
The main advantage of trading using opposite HANOVER INSURANCE and Metro AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HANOVER INSURANCE position performs unexpectedly, Metro AG 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 Metro AG will offset losses from the drop in Metro AG's long position.HANOVER INSURANCE vs. STMicroelectronics NV | HANOVER INSURANCE vs. Sims Metal Management | HANOVER INSURANCE vs. AGF Management Limited | HANOVER INSURANCE vs. Jupiter Fund Management |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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