Correlation Between Hanover Insurance and SIKA AG

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

Diversification Opportunities for Hanover Insurance and SIKA AG

-0.87

Correlation Coefficient

Hanover Insurance  SIKA AG

Pay attention - limited upside

The 3 months correlation between Hanover and SIKA is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and SIKA AG UNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIKA AG UNSPADR 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 SIKA AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIKA AG UNSPADR has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and SIKA AG go up and down completely randomly.

Pair Corralation between Hanover Insurance and SIKA AG

Assuming the 90 days horizon Hanover Insurance is expected to generate 1.05 times less return on investment than SIKA AG. But when comparing it to its historical volatility, The Hanover Insurance is 1.23 times less risky than SIKA AG. It trades about 0.03 of its potential returns per unit of risk. SIKA AG UNSPADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,121  in SIKA AG UNSPADR on September 14, 2024 and sell it today you would earn a total of  359.00  from holding SIKA AG UNSPADR or generate 16.93% return on investment over 90 days.

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

The Hanover Insurance  vs.  SIKA AG UNSPADR

Hanover Insurance

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 9 (%) 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.

SIKA AG UNSPADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIKA AG UNSPADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking signals 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 SIKA AG

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

The idea behind The Hanover Insurance and SIKA AG UNSPADR 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.