Correlation Between Boston Omaha and Hanover Insurance

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

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

Diversification Opportunities for Boston Omaha and Hanover Insurance

0.0

Correlation Coefficient

Boston Omaha  Hanover Insurance

Pay attention - limited upside

The 3 months correlation between Boston and Hanover is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Boston Omaha Corp and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Boston Omaha 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 Boston Omaha Corp 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 Boston Omaha i.e., Boston Omaha and Hanover Insurance go up and down completely randomly.

Pair Corralation between Boston Omaha and Hanover Insurance

Considering the 90-day investment horizon Boston Omaha is expected to generate 3.15 times less return on investment than Hanover Insurance. But when comparing it to its historical volatility, Boston Omaha Corp is 1.01 times less risky than Hanover Insurance. It trades about 0.05 of its potential returns per unit of risk. The Hanover Insurance is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  15,302  in The Hanover Insurance on December 28, 2024 and sell it today you would earn a total of  2,159  from holding The Hanover Insurance or generate 14.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Boston Omaha Corp  vs.  The Hanover Insurance

Boston Omaha Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Omaha Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Boston Omaha is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Hanover Insurance

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical indicators, Hanover Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Omaha and Hanover Insurance

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

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.