Correlation Between Newmont and HANOVER INSURANCE

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

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

Diversification Opportunities for Newmont and HANOVER INSURANCE

0.41

Correlation Coefficient

Newmont  HANOVER INSURANCE

Very weak diversification

The 3 months correlation between Newmont and HANOVER is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Newmont and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE and Newmont 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 Newmont 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 Newmont i.e., Newmont and HANOVER INSURANCE go up and down completely randomly.

Pair Corralation between Newmont and HANOVER INSURANCE

Assuming the 90 days trading horizon Newmont is expected to generate 1.16 times more return on investment than HANOVER INSURANCE. However, Newmont is 1.16 times more volatile than HANOVER INSURANCE. It trades about 0.15 of its potential returns per unit of risk. HANOVER INSURANCE is currently generating about 0.08 per unit of risk. If you would invest  3,651  in Newmont on December 22, 2024 and sell it today you would earn a total of  680.00  from holding Newmont or generate 18.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Newmont  vs.  HANOVER INSURANCE

Newmont

Risk-Adjusted Performance

Good

Over the last 90 days Newmont has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak primary indicators, Newmont exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 fragile basic indicators, HANOVER INSURANCE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Newmont and HANOVER INSURANCE

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