Correlation Between Hanover Insurance and ONEOK

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

Diversification Opportunities for Hanover Insurance and ONEOK

0.82

Correlation Coefficient

Hanover Insurance  ONEOK

Very poor diversification

The 3 months correlation between Hanover and ONEOK is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc 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 ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and ONEOK go up and down completely randomly.

Pair Corralation between Hanover Insurance and ONEOK

Assuming the 90 days horizon The Hanover Insurance is expected to generate 0.69 times more return on investment than ONEOK. However, The Hanover Insurance is 1.44 times less risky than ONEOK. It trades about -0.22 of its potential returns per unit of risk. ONEOK Inc is currently generating about -0.22 per unit of risk. If you would invest  15,206  in The Hanover Insurance on October 5, 2024 and sell it today you would lose (606.00) from holding The Hanover Insurance or give up 3.99% of portfolio value over 90 days.

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

The Hanover Insurance  vs.  ONEOK Inc

Hanover Insurance

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days The Hanover Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Hanover Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ONEOK Inc

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days ONEOK Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, ONEOK reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanover Insurance and ONEOK

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

The idea behind The Hanover Insurance and ONEOK Inc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.