Correlation Between Apple and HANOVER INSURANCE

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

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

Diversification Opportunities for Apple and HANOVER INSURANCE

0.77

Correlation Coefficient

Apple  HANOVER INSURANCE

Poor diversification

The 3 months correlation between Apple and HANOVER is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE and Apple 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 Apple 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 Apple i.e., Apple and HANOVER INSURANCE go up and down completely randomly.

Pair Corralation between Apple and HANOVER INSURANCE

Assuming the 90 days trading horizon Apple is expected to generate 2.08 times less return on investment than HANOVER INSURANCE. But when comparing it to its historical volatility, Apple Inc is 1.05 times less risky than HANOVER INSURANCE. It trades about 0.1 of its potential returns per unit of risk. HANOVER INSURANCE is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  13,014  in HANOVER INSURANCE on August 31, 2024 and sell it today you would earn a total of  2,386  from holding HANOVER INSURANCE or generate 18.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Apple Inc  vs.  HANOVER INSURANCE

Apple Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in December 2024.

HANOVER INSURANCE

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HANOVER INSURANCE are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, HANOVER INSURANCE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and HANOVER INSURANCE

The main advantage of trading using opposite Apple and HANOVER INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.