Correlation Between Hanover Insurance and Micron Technology

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

Diversification Opportunities for Hanover Insurance and Micron Technology

0.1

Correlation Coefficient

Hanover Insurance  Micron Technology

Average diversification

The 3 months correlation between Hanover and Micron is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Micron Technology go up and down completely randomly.

Pair Corralation between Hanover Insurance and Micron Technology

Assuming the 90 days horizon The Hanover Insurance is expected to generate 0.26 times more return on investment than Micron Technology. However, The Hanover Insurance is 3.9 times less risky than Micron Technology. It trades about -0.21 of its potential returns per unit of risk. Micron Technology is currently generating about -0.12 per unit of risk. If you would invest  15,106  in The Hanover Insurance on September 22, 2024 and sell it today you would lose (806.00) from holding The Hanover Insurance or give up 5.34% of portfolio value over 90 days.

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

The Hanover Insurance  vs.  Micron Technology

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 January 2025.

Micron Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Micron Technology is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hanover Insurance and Micron Technology

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

The idea behind The Hanover Insurance and Micron Technology 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.