Correlation Between HANOVER INSURANCE and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both HANOVER INSURANCE and NorAm Drilling 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 NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HANOVER INSURANCE and NorAm Drilling AS, you can compare the effects of market volatilities on HANOVER INSURANCE and NorAm Drilling 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 NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of HANOVER INSURANCE and NorAm Drilling.
Diversification Opportunities for HANOVER INSURANCE and NorAm Drilling
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between HANOVER and NorAm is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding HANOVER INSURANCE and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS 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 NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of HANOVER INSURANCE i.e., HANOVER INSURANCE and NorAm Drilling go up and down completely randomly.
Pair Corralation between HANOVER INSURANCE and NorAm Drilling
Assuming the 90 days trading horizon HANOVER INSURANCE is expected to generate 0.32 times more return on investment than NorAm Drilling. However, HANOVER INSURANCE is 3.1 times less risky than NorAm Drilling. It trades about 0.31 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.0 per unit of risk. If you would invest 14,600 in HANOVER INSURANCE on December 5, 2024 and sell it today you would earn a total of 1,800 from holding HANOVER INSURANCE or generate 12.33% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
HANOVER INSURANCE vs. NorAm Drilling AS
Performance |
Timeline |
HANOVER INSURANCE |
NorAm Drilling AS |
HANOVER INSURANCE and NorAm Drilling Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HANOVER INSURANCE and NorAm Drilling
The main advantage of trading using opposite HANOVER INSURANCE and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HANOVER INSURANCE position performs unexpectedly, NorAm Drilling 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 NorAm Drilling will offset losses from the drop in NorAm Drilling's long position.HANOVER INSURANCE vs. X FAB Silicon Foundries | HANOVER INSURANCE vs. Siamgas And Petrochemicals | HANOVER INSURANCE vs. SEKISUI CHEMICAL | HANOVER INSURANCE vs. CeoTronics AG |
NorAm Drilling vs. Xinhua Winshare Publishing | NorAm Drilling vs. Nordic Semiconductor ASA | NorAm Drilling vs. TAL Education Group | NorAm Drilling vs. Magnachip Semiconductor |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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