Correlation Between Tesla and Hanover Insurance

Can any of the company-specific risk be diversified away by investing in both Tesla and Hanover Insurance 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 Tesla and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tesla Inc and The Hanover Insurance, you can compare the effects of market volatilities on Tesla and Hanover Insurance 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 Tesla with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Hanover Insurance.

Diversification Opportunities for Tesla and Hanover Insurance

-0.84

Correlation Coefficient

Tesla  Hanover Insurance

Pay attention - limited upside

The 3 months correlation between Tesla and Hanover is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Tesla 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 Tesla Inc are associated (or correlated) with Hanover Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Insurance has no effect on the direction of Tesla i.e., Tesla and Hanover Insurance go up and down completely randomly.

Pair Corralation between Tesla and Hanover Insurance

Given the investment horizon of 90 days Tesla Inc is expected to under-perform the Hanover Insurance. In addition to that, Tesla is 2.86 times more volatile than The Hanover Insurance. It trades about -0.13 of its total potential returns per unit of risk. The Hanover Insurance is currently generating about 0.15 per unit of volatility. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Tesla Inc  vs.  The Hanover Insurance

Tesla Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with Tesla and Hanover Insurance

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

The idea behind Tesla Inc and The Hanover Insurance 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.