Correlation Between Mitsubishi Estate and HANOVER INSURANCE

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

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

Diversification Opportunities for Mitsubishi Estate and HANOVER INSURANCE

-0.87

Correlation Coefficient

Mitsubishi Estate  HANOVER INSURANCE

Pay attention - limited upside

The 3 months correlation between Mitsubishi and HANOVER is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Estate Co and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE and Mitsubishi Estate 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 Mitsubishi Estate Co 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 Mitsubishi Estate i.e., Mitsubishi Estate and HANOVER INSURANCE go up and down completely randomly.

Pair Corralation between Mitsubishi Estate and HANOVER INSURANCE

Assuming the 90 days horizon Mitsubishi Estate Co is expected to under-perform the HANOVER INSURANCE. In addition to that, Mitsubishi Estate is 1.16 times more volatile than HANOVER INSURANCE. It trades about -0.01 of its total potential returns per unit of risk. HANOVER INSURANCE is currently generating about 0.41 per unit of volatility. If you would invest  13,300  in HANOVER INSURANCE on September 4, 2024 and sell it today you would earn a total of  2,000  from holding HANOVER INSURANCE or generate 15.04% return on investment over 90 days.

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

Mitsubishi Estate Co  vs.  HANOVER INSURANCE

Mitsubishi Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Estate Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

HANOVER INSURANCE

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HANOVER INSURANCE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, HANOVER INSURANCE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsubishi Estate and HANOVER INSURANCE

The main advantage of trading using opposite Mitsubishi Estate and HANOVER INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi Estate 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 Mitsubishi Estate Co 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.