Correlation Between HANOVER INSURANCE and X-FAB Silicon

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

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

Diversification Opportunities for HANOVER INSURANCE and X-FAB Silicon

-0.52

Correlation Coefficient

HANOVER INSURANCE  X-FAB Silicon

Excellent diversification

The 3 months correlation between HANOVER and X-FAB is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding HANOVER INSURANCE and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X-FAB Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of HANOVER INSURANCE i.e., HANOVER INSURANCE and X-FAB Silicon go up and down completely randomly.

Pair Corralation between HANOVER INSURANCE and X-FAB Silicon

Assuming the 90 days trading horizon HANOVER INSURANCE is expected to generate 0.65 times more return on investment than X-FAB Silicon. However, HANOVER INSURANCE is 1.55 times less risky than X-FAB Silicon. It trades about 0.09 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.04 per unit of risk. If you would invest  14,519  in HANOVER INSURANCE on December 20, 2024 and sell it today you would earn a total of  1,281  from holding HANOVER INSURANCE or generate 8.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

HANOVER INSURANCE  vs.  X FAB Silicon Foundries

HANOVER INSURANCE

Risk-Adjusted Performance

Modest

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 April 2025.

X FAB Silicon

Risk-Adjusted Performance

Very Weak

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with HANOVER INSURANCE and X-FAB Silicon

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

The idea behind HANOVER INSURANCE and X FAB Silicon Foundries 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.