Correlation Between Japan Asia and HANOVER INSURANCE

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

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

Diversification Opportunities for Japan Asia and HANOVER INSURANCE

0.63

Correlation Coefficient

Japan Asia  HANOVER INSURANCE

Poor diversification

The 3 months correlation between Japan and HANOVER is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Japan Asia Investment and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE and Japan Asia 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 Japan Asia Investment 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 Japan Asia i.e., Japan Asia and HANOVER INSURANCE go up and down completely randomly.

Pair Corralation between Japan Asia and HANOVER INSURANCE

Assuming the 90 days horizon Japan Asia is expected to generate 2.81 times less return on investment than HANOVER INSURANCE. But when comparing it to its historical volatility, Japan Asia Investment is 1.04 times less risky than HANOVER INSURANCE. It trades about 0.03 of its potential returns per unit of risk. HANOVER INSURANCE is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  15,107  in HANOVER INSURANCE on December 4, 2024 and sell it today you would earn a total of  1,193  from holding HANOVER INSURANCE or generate 7.9% return on investment over 90 days.

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

Japan Asia Investment  vs.  HANOVER INSURANCE

Japan Asia Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Asia Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Japan Asia 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HANOVER INSURANCE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, HANOVER INSURANCE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Japan Asia and HANOVER INSURANCE

The main advantage of trading using opposite Japan Asia and HANOVER INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Asia 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 Japan Asia Investment 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.