Correlation Between Hanover Insurance and Gap,

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

Diversification Opportunities for Hanover Insurance and Gap,

0.66

Correlation Coefficient

Hanover Insurance  Gap,

Poor diversification

The 3 months correlation between Hanover and Gap, is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Gap, go up and down completely randomly.

Pair Corralation between Hanover Insurance and Gap,

Considering the 90-day investment horizon Hanover Insurance is expected to generate 4.2 times less return on investment than Gap,. But when comparing it to its historical volatility, The Hanover Insurance is 2.11 times less risky than Gap,. It trades about 0.06 of its potential returns per unit of risk. The Gap, is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,026  in The Gap, on September 16, 2024 and sell it today you would earn a total of  403.00  from holding The Gap, or generate 19.89% return on investment over 90 days.

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

The Hanover Insurance  vs.  The Gap,

Hanover Insurance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Hanover Insurance is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Gap,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanover Insurance and Gap,

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

The idea behind The Hanover Insurance and The Gap, 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.