Correlation Between HANOVER INSURANCE and Goldman Sachs

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

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

Diversification Opportunities for HANOVER INSURANCE and Goldman Sachs

0.61

Correlation Coefficient

HANOVER INSURANCE  Goldman Sachs

Poor diversification

The 3 months correlation between HANOVER and Goldman is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding HANOVER INSURANCE and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs has no effect on the direction of HANOVER INSURANCE i.e., HANOVER INSURANCE and Goldman Sachs go up and down completely randomly.

Pair Corralation between HANOVER INSURANCE and Goldman Sachs

Assuming the 90 days trading horizon HANOVER INSURANCE is expected to generate 0.98 times more return on investment than Goldman Sachs. However, HANOVER INSURANCE is 1.02 times less risky than Goldman Sachs. It trades about 0.17 of its potential returns per unit of risk. The Goldman Sachs is currently generating about -0.1 per unit of risk. If you would invest  14,900  in HANOVER INSURANCE on December 1, 2024 and sell it today you would earn a total of  1,000.00  from holding HANOVER INSURANCE or generate 6.71% 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.  The Goldman Sachs

HANOVER INSURANCE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HANOVER INSURANCE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, HANOVER INSURANCE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Goldman Sachs

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Goldman Sachs is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HANOVER INSURANCE and Goldman Sachs

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

The idea behind HANOVER INSURANCE and The Goldman Sachs 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.