Correlation Between Hanover Insurance and NEXTDC

Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and NEXTDC 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 NEXTDC 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 NEXTDC LTD, you can compare the effects of market volatilities on Hanover Insurance and NEXTDC 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 NEXTDC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and NEXTDC.

Diversification Opportunities for Hanover Insurance and NEXTDC

0.0

Correlation Coefficient

Hanover Insurance  NEXTDC

Pay attention - limited upside

The 3 months correlation between Hanover and NEXTDC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and NEXTDC LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXTDC LTD 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 NEXTDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXTDC LTD has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and NEXTDC go up and down completely randomly.

Pair Corralation between Hanover Insurance and NEXTDC

If you would invest  13,516  in The Hanover Insurance on October 26, 2024 and sell it today you would earn a total of  1,284  from holding The Hanover Insurance or generate 9.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.69%
Values	Daily Returns

The Hanover Insurance  vs.  NEXTDC LTD

Hanover Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 8 (%) 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.

NEXTDC LTD

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days NEXTDC LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NEXTDC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hanover Insurance and NEXTDC

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

The idea behind The Hanover Insurance and NEXTDC LTD 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.