Correlation Between Hanover Insurance and 191216CM0

Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and 191216CM0 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 191216CM0 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 COCA COLA CO, you can compare the effects of market volatilities on Hanover Insurance and 191216CM0 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 191216CM0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and 191216CM0.

Diversification Opportunities for Hanover Insurance and 191216CM0

-0.2

Correlation Coefficient

Hanover Insurance  191216CM0

Good diversification

The 3 months correlation between Hanover and 191216CM0 is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and COCA COLA CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A CO 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 191216CM0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A CO has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and 191216CM0 go up and down completely randomly.

Pair Corralation between Hanover Insurance and 191216CM0

Considering the 90-day investment horizon The Hanover Insurance is expected to generate 2.71 times more return on investment than 191216CM0. However, Hanover Insurance is 2.71 times more volatile than COCA COLA CO. It trades about 0.1 of its potential returns per unit of risk. COCA COLA CO is currently generating about 0.02 per unit of risk. If you would invest  10,650  in The Hanover Insurance on September 26, 2024 and sell it today you would earn a total of  4,890  from holding The Hanover Insurance or generate 45.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.36%
Values	Daily Returns

The Hanover Insurance  vs.  COCA COLA CO

Hanover Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 6 (%) 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 January 2025.

COCA A CO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COCA COLA CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 191216CM0 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hanover Insurance and 191216CM0

The main advantage of trading using opposite Hanover Insurance and 191216CM0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, 191216CM0 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 191216CM0 will offset losses from the drop in 191216CM0's long position.

The idea behind The Hanover Insurance and COCA COLA CO 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..