Correlation Between Amazon and HANOVER INSURANCE

Can any of the company-specific risk be diversified away by investing in both Amazon and HANOVER INSURANCE 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 Amazon and HANOVER INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amazon Inc and HANOVER INSURANCE, you can compare the effects of market volatilities on Amazon and HANOVER INSURANCE 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 Amazon with a short position of HANOVER INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and HANOVER INSURANCE.

Diversification Opportunities for Amazon and HANOVER INSURANCE

-0.5

Correlation Coefficient

Amazon  HANOVER INSURANCE

Very good diversification

The 3 months correlation between Amazon and HANOVER is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE and Amazon 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 Amazon Inc are associated (or correlated) with HANOVER INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANOVER INSURANCE has no effect on the direction of Amazon i.e., Amazon and HANOVER INSURANCE go up and down completely randomly.

Pair Corralation between Amazon and HANOVER INSURANCE

Assuming the 90 days trading horizon Amazon Inc is expected to under-perform the HANOVER INSURANCE. In addition to that, Amazon is 1.04 times more volatile than HANOVER INSURANCE. It trades about -0.16 of its total potential returns per unit of risk. HANOVER INSURANCE is currently generating about 0.11 per unit of volatility. If you would invest  14,519  in HANOVER INSURANCE on December 30, 2024 and sell it today you would earn a total of  1,581  from holding HANOVER INSURANCE or generate 10.89% return on investment over 90 days.

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

Amazon Inc  vs.  HANOVER INSURANCE

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

HANOVER INSURANCE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HANOVER INSURANCE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, HANOVER INSURANCE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Amazon and HANOVER INSURANCE

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

The idea behind Amazon Inc and HANOVER INSURANCE 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..