Correlation Between Hanover Insurance and Chubb

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

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

Diversification Opportunities for Hanover Insurance and Chubb

0.81

Correlation Coefficient

Hanover Insurance  Chubb

Very poor diversification

The 3 months correlation between Hanover and Chubb is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb and Hanover Insurance 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 The Hanover Insurance are associated (or correlated) with Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Chubb go up and down completely randomly.

Pair Corralation between Hanover Insurance and Chubb

Considering the 90-day investment horizon The Hanover Insurance is expected to generate 1.18 times more return on investment than Chubb. However, Hanover Insurance is 1.18 times more volatile than Chubb. It trades about 0.14 of its potential returns per unit of risk. Chubb is currently generating about 0.1 per unit of risk. If you would invest  15,350  in The Hanover Insurance on December 27, 2024 and sell it today you would earn a total of  2,094  from holding The Hanover Insurance or generate 13.64% return on investment over 90 days.

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

The Hanover Insurance  vs.  Chubb

Hanover Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical indicators, Hanover Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Chubb

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chubb are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, Chubb may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hanover Insurance and Chubb

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

The idea behind The Hanover Insurance and Chubb 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.