Correlation Between Gap, and Hanover Insurance

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

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

Diversification Opportunities for Gap, and Hanover Insurance

-0.34

Correlation Coefficient

Gap,  Hanover Insurance

Very good diversification

The 3 months correlation between Gap, and Hanover is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Gap, 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 Gap, 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 Gap, i.e., Gap, and Hanover Insurance go up and down completely randomly.

Pair Corralation between Gap, and Hanover Insurance

Considering the 90-day investment horizon The Gap, is expected to under-perform the Hanover Insurance. In addition to that, Gap, is 1.2 times more volatile than The Hanover Insurance. It trades about -0.15 of its total potential returns per unit of risk. The Hanover Insurance is currently generating about 0.26 per unit of volatility. If you would invest  15,348  in The Hanover Insurance on December 5, 2024 and sell it today you would earn a total of  1,616  from holding The Hanover Insurance or generate 10.53% return on investment over 90 days.

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

The Gap,  vs.  The Hanover Insurance

Gap,

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gap, has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Hanover Insurance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 3 (%) 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 Gap, and Hanover Insurance

The main advantage of trading using opposite Gap, and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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 The Gap, 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.