Correlation Between Hanover Insurance and Grupo Aval

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

Diversification Opportunities for Hanover Insurance and Grupo Aval

0.45

Correlation Coefficient

Hanover Insurance  Grupo Aval

Very weak diversification

The 3 months correlation between Hanover and Grupo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and Grupo Aval Acciones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Aval Acciones 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 Grupo Aval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Aval Acciones has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Grupo Aval go up and down completely randomly.

Pair Corralation between Hanover Insurance and Grupo Aval

Assuming the 90 days horizon Hanover Insurance is expected to generate 2.92 times less return on investment than Grupo Aval. But when comparing it to its historical volatility, The Hanover Insurance is 1.45 times less risky than Grupo Aval. It trades about 0.09 of its potential returns per unit of risk. Grupo Aval Acciones is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  191.00  in Grupo Aval Acciones on December 21, 2024 and sell it today you would earn a total of  65.00  from holding Grupo Aval Acciones or generate 34.03% return on investment over 90 days.

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

The Hanover Insurance  vs.  Grupo Aval Acciones

Hanover Insurance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 6 (%) 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 April 2025.

Grupo Aval Acciones

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval Acciones are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Grupo Aval unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanover Insurance and Grupo Aval

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

The idea behind The Hanover Insurance and Grupo Aval Acciones 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..