Correlation Between HANOVER INSURANCE and EBay

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

By analyzing existing cross correlation between HANOVER INSURANCE and eBay Inc, you can compare the effects of market volatilities on HANOVER INSURANCE and EBay 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 EBay. Check out your portfolio center. Please also check ongoing floating volatility patterns of HANOVER INSURANCE and EBay.

Diversification Opportunities for HANOVER INSURANCE and EBay

0.36

Correlation Coefficient

HANOVER INSURANCE  EBay

Weak diversification

The 3 months correlation between HANOVER and EBay is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding HANOVER INSURANCE and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of HANOVER INSURANCE i.e., HANOVER INSURANCE and EBay go up and down completely randomly.

Pair Corralation between HANOVER INSURANCE and EBay

Assuming the 90 days trading horizon HANOVER INSURANCE is expected to generate 1.55 times less return on investment than EBay. But when comparing it to its historical volatility, HANOVER INSURANCE is 1.31 times less risky than EBay. It trades about 0.05 of its potential returns per unit of risk. eBay Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,325  in eBay Inc on October 21, 2024 and sell it today you would earn a total of  2,112  from holding eBay Inc or generate 48.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.62%
Values	Daily Returns

HANOVER INSURANCE  vs.  eBay Inc

HANOVER INSURANCE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HANOVER INSURANCE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, HANOVER INSURANCE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

eBay Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EBay may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with HANOVER INSURANCE and EBay

The main advantage of trading using opposite HANOVER INSURANCE and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HANOVER INSURANCE position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.

The idea behind HANOVER INSURANCE and eBay Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.