Correlation Between Hanover Insurance and Pebblebrook Hotel

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

Diversification Opportunities for Hanover Insurance and Pebblebrook Hotel

0.61

Correlation Coefficient

Hanover Insurance  Pebblebrook Hotel

Poor diversification

The 3 months correlation between Hanover and Pebblebrook is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and Pebblebrook Hotel Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pebblebrook Hotel Trust 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 Pebblebrook Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pebblebrook Hotel Trust has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Pebblebrook Hotel go up and down completely randomly.

Pair Corralation between Hanover Insurance and Pebblebrook Hotel

Assuming the 90 days horizon The Hanover Insurance is expected to generate 0.69 times more return on investment than Pebblebrook Hotel. However, The Hanover Insurance is 1.44 times less risky than Pebblebrook Hotel. It trades about 0.04 of its potential returns per unit of risk. Pebblebrook Hotel Trust is currently generating about 0.01 per unit of risk. If you would invest  11,804  in The Hanover Insurance on October 4, 2024 and sell it today you would earn a total of  2,796  from holding The Hanover Insurance or generate 23.69% return on investment over 90 days.

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

The Hanover Insurance  vs.  Pebblebrook Hotel Trust

Hanover Insurance

Risk-Adjusted Performance

6 of 100

Modest

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 February 2025.

Pebblebrook Hotel Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pebblebrook Hotel Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Pebblebrook Hotel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hanover Insurance and Pebblebrook Hotel

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

The idea behind The Hanover Insurance and Pebblebrook Hotel Trust 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.