Correlation Between Hanover Insurance and Sirius

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

Diversification Opportunities for Hanover Insurance and Sirius

-0.06

Correlation Coefficient

Hanover Insurance  Sirius

Good diversification

The 3 months correlation between Hanover and Sirius is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and Sirius XM Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sirius XM Holdings 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 Sirius. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sirius XM Holdings has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Sirius go up and down completely randomly.

Pair Corralation between Hanover Insurance and Sirius

Considering the 90-day investment horizon The Hanover Insurance is expected to generate 3.52 times more return on investment than Sirius. However, Hanover Insurance is 3.52 times more volatile than Sirius XM Holdings. It trades about 0.15 of its potential returns per unit of risk. Sirius XM Holdings is currently generating about -0.08 per unit of risk. If you would invest  15,302  in The Hanover Insurance on December 28, 2024 and sell it today you would earn a total of  2,159  from holding The Hanover Insurance or generate 14.11% return on investment over 90 days.

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

The Hanover Insurance  vs.  Sirius XM Holdings

Hanover Insurance

Risk-Adjusted Performance

Good

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.

Sirius XM Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sirius XM Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sirius 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 Sirius

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

The idea behind The Hanover Insurance and Sirius XM Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..