Correlation Between Hanover Insurance and Via Renewables

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

Diversification Opportunities for Hanover Insurance and Via Renewables

0.57

Correlation Coefficient

Hanover Insurance  Via Renewables

Very weak diversification

The 3 months correlation between Hanover and Via is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and Via Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Via Renewables 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 Via Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Via Renewables has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Via Renewables go up and down completely randomly.

Pair Corralation between Hanover Insurance and Via Renewables

Considering the 90-day investment horizon The Hanover Insurance is expected to generate 2.29 times more return on investment than Via Renewables. However, Hanover Insurance is 2.29 times more volatile than Via Renewables. It trades about 0.15 of its potential returns per unit of risk. Via Renewables is currently generating about 0.14 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

The Hanover Insurance  vs.  Via Renewables

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.

Via Renewables

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Via Renewables is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Hanover Insurance and Via Renewables

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

The idea behind The Hanover Insurance and Via Renewables 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.