Correlation Between Argo Group and Hanover Insurance

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

By analyzing existing cross correlation between Argo Group International and The Hanover Insurance, you can compare the effects of market volatilities on Argo Group 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 Argo Group with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Argo Group and Hanover Insurance.

Diversification Opportunities for Argo Group and Hanover Insurance

0.53

Correlation Coefficient

Argo Group  Hanover Insurance

Very weak diversification

The 3 months correlation between Argo and Hanover is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Argo Group International and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Argo Group 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 Argo Group International 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 Argo Group i.e., Argo Group and Hanover Insurance go up and down completely randomly.

Pair Corralation between Argo Group and Hanover Insurance

Assuming the 90 days trading horizon Argo Group International is expected to generate 0.17 times more return on investment than Hanover Insurance. However, Argo Group International is 5.95 times less risky than Hanover Insurance. It trades about 0.1 of its potential returns per unit of risk. The Hanover Insurance is currently generating about -0.2 per unit of risk. If you would invest  2,486  in Argo Group International on October 4, 2024 and sell it today you would earn a total of  10.00  from holding Argo Group International or generate 0.4% return on investment over 90 days.

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

Argo Group International  vs.  The Hanover Insurance

Argo Group International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Argo Group International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Argo Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Hanover Insurance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Hanover Insurance is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Argo Group and Hanover Insurance

The main advantage of trading using opposite Argo Group and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Argo Group 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 Argo Group International and The 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.

Check out your portfolio center.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.