Correlation Between Major League and Hanover House

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

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

Diversification Opportunities for Major League and Hanover House

0.0

Correlation Coefficient

Major League  Hanover House

Pay attention - limited upside

The 3 months correlation between Major and Hanover is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Major League Football and Hanover House in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover House and Major League 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 Major League Football are associated (or correlated) with Hanover House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover House has no effect on the direction of Major League i.e., Major League and Hanover House go up and down completely randomly.

Pair Corralation between Major League and Hanover House

If you would invest  0.75  in Hanover House on December 25, 2024 and sell it today you would lose (0.14) from holding Hanover House or give up 18.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Major League Football  vs.  Hanover House

Major League Football

Risk-Adjusted Performance

Very Weak

Over the last 90 days Major League Football has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Major League is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Hanover House

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hanover House has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak basic indicators, Hanover House may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Major League and Hanover House

The main advantage of trading using opposite Major League and Hanover House positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major League position performs unexpectedly, Hanover House 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 House will offset losses from the drop in Hanover House's long position.

The idea behind Major League Football and Hanover House 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.