Correlation Between Engie SA and HANOVER INSURANCE

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

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

Diversification Opportunities for Engie SA and HANOVER INSURANCE

-0.59

Correlation Coefficient

Engie SA  HANOVER INSURANCE

Excellent diversification

The 3 months correlation between Engie and HANOVER is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Engie SA and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE and Engie SA 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 Engie SA 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 Engie SA i.e., Engie SA and HANOVER INSURANCE go up and down completely randomly.

Pair Corralation between Engie SA and HANOVER INSURANCE

Assuming the 90 days horizon Engie SA is expected to under-perform the HANOVER INSURANCE. But the stock apears to be less risky and, when comparing its historical volatility, Engie SA is 1.47 times less risky than HANOVER INSURANCE. The stock trades about -0.09 of its potential returns per unit of risk. The HANOVER INSURANCE is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  13,417  in HANOVER INSURANCE on September 27, 2024 and sell it today you would earn a total of  1,183  from holding HANOVER INSURANCE or generate 8.82% return on investment over 90 days.

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

Engie SA  vs.  HANOVER INSURANCE

Engie SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engie SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Engie SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

HANOVER INSURANCE

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HANOVER INSURANCE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, HANOVER INSURANCE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Engie SA and HANOVER INSURANCE

The main advantage of trading using opposite Engie SA and HANOVER INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engie SA 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 Engie SA 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.