Correlation Between HANOVER INSURANCE and CarMax
Can any of the company-specific risk be diversified away by investing in both HANOVER INSURANCE and CarMax 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 CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HANOVER INSURANCE and CarMax Inc, you can compare the effects of market volatilities on HANOVER INSURANCE and CarMax 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 CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of HANOVER INSURANCE and CarMax.
Diversification Opportunities for HANOVER INSURANCE and CarMax
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HANOVER and CarMax is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding HANOVER INSURANCE and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax 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 CarMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarMax Inc has no effect on the direction of HANOVER INSURANCE i.e., HANOVER INSURANCE and CarMax go up and down completely randomly.
Pair Corralation between HANOVER INSURANCE and CarMax
Assuming the 90 days trading horizon HANOVER INSURANCE is expected to generate 0.65 times more return on investment than CarMax. However, HANOVER INSURANCE is 1.53 times less risky than CarMax. It trades about 0.11 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.02 per unit of risk. If you would invest 9,294 in HANOVER INSURANCE on October 4, 2024 and sell it today you would earn a total of 5,506 from holding HANOVER INSURANCE or generate 59.24% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.7% |
Values | Daily Returns |
HANOVER INSURANCE vs. CarMax Inc
Performance |
Timeline |
HANOVER INSURANCE |
CarMax Inc |
HANOVER INSURANCE and CarMax Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HANOVER INSURANCE and CarMax
The main advantage of trading using opposite HANOVER INSURANCE and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HANOVER INSURANCE position performs unexpectedly, CarMax 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 CarMax will offset losses from the drop in CarMax's long position.HANOVER INSURANCE vs. ScanSource | HANOVER INSURANCE vs. CLOVER HEALTH INV | HANOVER INSURANCE vs. PTT Global Chemical | HANOVER INSURANCE vs. Sekisui Chemical Co |
CarMax vs. Heidelberg Materials AG | CarMax vs. GOODYEAR T RUBBER | CarMax vs. Summit Materials | CarMax vs. Applied Materials |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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