Correlation Between Hanover Insurance and Hyundai

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

Diversification Opportunities for Hanover Insurance and Hyundai

0.0

Correlation Coefficient

Hanover Insurance  Hyundai

Pay attention - limited upside

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

Pair Corralation between Hanover Insurance and Hyundai

Assuming the 90 days horizon The Hanover Insurance is expected to under-perform the Hyundai. But the stock apears to be less risky and, when comparing its historical volatility, The Hanover Insurance is 3.13 times less risky than Hyundai. The stock trades about -0.08 of its potential returns per unit of risk. The Hyundai Motor is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,860  in Hyundai Motor on October 10, 2024 and sell it today you would earn a total of  80.00  from holding Hyundai Motor or generate 1.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	52.94%
Values	Daily Returns

The Hanover Insurance  vs.  Hyundai Motor

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.

Hyundai Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hyundai is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hanover Insurance and Hyundai

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

The idea behind The Hanover Insurance and Hyundai Motor 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.