Correlation Between Hanover Insurance and Thai Beverage

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

Diversification Opportunities for Hanover Insurance and Thai Beverage

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Hanover and Thai is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and Thai Beverage Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Beverage Public 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 Thai Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Beverage Public has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Thai Beverage go up and down completely randomly.

Pair Corralation between Hanover Insurance and Thai Beverage

Assuming the 90 days horizon Hanover Insurance is expected to generate 5.07 times less return on investment than Thai Beverage. But when comparing it to its historical volatility, The Hanover Insurance is 3.94 times less risky than Thai Beverage. It trades about 0.05 of its potential returns per unit of risk. Thai Beverage Public is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Thai Beverage Public on October 5, 2024 and sell it today you would earn a total of  23.00  from holding Thai Beverage Public or generate 164.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

The Hanover Insurance  vs.  Thai Beverage Public

 Performance 
       Timeline  
Hanover Insurance 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
OK
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.
Thai Beverage Public 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Thai Beverage Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Thai Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Hanover Insurance and Thai Beverage Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hanover Insurance and Thai Beverage

The main advantage of trading using opposite Hanover Insurance and Thai Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, Thai Beverage 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 Thai Beverage will offset losses from the drop in Thai Beverage's long position.
The idea behind The Hanover Insurance and Thai Beverage Public 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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