Correlation Between Hanover Insurance and PURETECH HEALTH

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

By analyzing existing cross correlation between The Hanover Insurance and PURETECH HEALTH PLC, you can compare the effects of market volatilities on Hanover Insurance and PURETECH HEALTH 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 PURETECH HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and PURETECH HEALTH.

Diversification Opportunities for Hanover Insurance and PURETECH HEALTH

0.74

Correlation Coefficient

Hanover Insurance  PURETECH HEALTH

Poor diversification

The 3 months correlation between Hanover and PURETECH is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and PURETECH HEALTH PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PURETECH HEALTH PLC 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 The Hanover Insurance are associated (or correlated) with PURETECH HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PURETECH HEALTH PLC has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and PURETECH HEALTH go up and down completely randomly.

Pair Corralation between Hanover Insurance and PURETECH HEALTH

Assuming the 90 days horizon The Hanover Insurance is expected to generate 0.32 times more return on investment than PURETECH HEALTH. However, The Hanover Insurance is 3.12 times less risky than PURETECH HEALTH. It trades about -0.08 of its potential returns per unit of risk. PURETECH HEALTH PLC is currently generating about -0.2 per unit of risk. If you would invest  14,908  in The Hanover Insurance on October 10, 2024 and sell it today you would lose (208.00) from holding The Hanover Insurance or give up 1.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

The Hanover Insurance  vs.  PURETECH HEALTH PLC

Hanover Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hanover Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PURETECH HEALTH PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PURETECH HEALTH PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PURETECH HEALTH is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hanover Insurance and PURETECH HEALTH

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

The idea behind The Hanover Insurance and PURETECH HEALTH PLC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..