Correlation Between Hanover Insurance and ENTAIN PLC

Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and ENTAIN PLC 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 ENTAIN PLC 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 ENTAIN PLC UNSPADR1, you can compare the effects of market volatilities on Hanover Insurance and ENTAIN PLC 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 ENTAIN PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and ENTAIN PLC.

Diversification Opportunities for Hanover Insurance and ENTAIN PLC

0.25

Correlation Coefficient

Hanover Insurance  ENTAIN PLC

Modest diversification

The 3 months correlation between Hanover and ENTAIN is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and ENTAIN PLC UNSPADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENTAIN PLC UNSPADR1 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 ENTAIN PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENTAIN PLC UNSPADR1 has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and ENTAIN PLC go up and down completely randomly.

Pair Corralation between Hanover Insurance and ENTAIN PLC

Assuming the 90 days horizon The Hanover Insurance is expected to generate 0.6 times more return on investment than ENTAIN PLC. However, The Hanover Insurance is 1.67 times less risky than ENTAIN PLC. It trades about 0.11 of its potential returns per unit of risk. ENTAIN PLC UNSPADR1 is currently generating about -0.05 per unit of risk. If you would invest  13,715  in The Hanover Insurance on October 23, 2024 and sell it today you would earn a total of  1,285  from holding The Hanover Insurance or generate 9.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

The Hanover Insurance  vs.  ENTAIN PLC UNSPADR1

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 uncertain basic indicators, Hanover Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ENTAIN PLC UNSPADR1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENTAIN PLC UNSPADR1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Hanover Insurance and ENTAIN PLC

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

The idea behind The Hanover Insurance and ENTAIN PLC UNSPADR1 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 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.