Correlation Between Hanover Insurance and Chewy

Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and Chewy 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 Chewy 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 Chewy Inc, you can compare the effects of market volatilities on Hanover Insurance and Chewy 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 Chewy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and Chewy.

Diversification Opportunities for Hanover Insurance and Chewy

-0.3

Correlation Coefficient

Hanover Insurance  Chewy

Very good diversification

The 3 months correlation between Hanover and Chewy is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and Chewy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chewy Inc 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 Chewy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chewy Inc has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Chewy go up and down completely randomly.

Pair Corralation between Hanover Insurance and Chewy

Considering the 90-day investment horizon The Hanover Insurance is expected to generate 0.59 times more return on investment than Chewy. However, The Hanover Insurance is 1.69 times less risky than Chewy. It trades about 0.12 of its potential returns per unit of risk. Chewy Inc is currently generating about 0.01 per unit of risk. If you would invest  15,518  in The Hanover Insurance on December 25, 2024 and sell it today you would earn a total of  1,712  from holding The Hanover Insurance or generate 11.03% return on investment over 90 days.

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

The Hanover Insurance  vs.  Chewy Inc

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 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical indicators, Hanover Insurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Chewy Inc

Risk-Adjusted Performance

Weak

Over the last 90 days Chewy Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chewy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hanover Insurance and Chewy

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

The idea behind The Hanover Insurance and Chewy Inc 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..