Correlation Between MARKET VECTR and Hanover Insurance

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

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

Diversification Opportunities for MARKET VECTR and Hanover Insurance

0.86

Correlation Coefficient

MARKET VECTR  Hanover Insurance

Very poor diversification

The 3 months correlation between MARKET and Hanover is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding MARKET VECTR RETAIL and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and MARKET VECTR 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 MARKET VECTR RETAIL 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 MARKET VECTR i.e., MARKET VECTR and Hanover Insurance go up and down completely randomly.

Pair Corralation between MARKET VECTR and Hanover Insurance

Assuming the 90 days trading horizon MARKET VECTR RETAIL is expected to generate 0.53 times more return on investment than Hanover Insurance. However, MARKET VECTR RETAIL is 1.87 times less risky than Hanover Insurance. It trades about -0.09 of its potential returns per unit of risk. The Hanover Insurance is currently generating about -0.13 per unit of risk. If you would invest  21,955  in MARKET VECTR RETAIL on September 27, 2024 and sell it today you would lose (260.00) from holding MARKET VECTR RETAIL or give up 1.18% of portfolio value over 90 days.

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

MARKET VECTR RETAIL  vs.  The Hanover Insurance

MARKET VECTR RETAIL

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MARKET VECTR RETAIL are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, MARKET VECTR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hanover Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hanover Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MARKET VECTR and Hanover Insurance

The main advantage of trading using opposite MARKET VECTR and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MARKET VECTR 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 MARKET VECTR RETAIL 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.