Correlation Between W R and Hanover Insurance

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

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

Diversification Opportunities for W R and Hanover Insurance

0.92

Correlation Coefficient

W R  Hanover Insurance

Almost no diversification

The 3 months correlation between WR1 and Hanover is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding W R Berkley and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and W R 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 W R Berkley 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 W R i.e., W R and Hanover Insurance go up and down completely randomly.

Pair Corralation between W R and Hanover Insurance

Assuming the 90 days horizon W R is expected to generate 1.23 times less return on investment than Hanover Insurance. In addition to that, W R is 1.14 times more volatile than The Hanover Insurance. It trades about 0.12 of its total potential returns per unit of risk. The Hanover Insurance is currently generating about 0.17 per unit of volatility. If you would invest  12,815  in The Hanover Insurance on September 12, 2024 and sell it today you would earn a total of  2,185  from holding The Hanover Insurance or generate 17.05% return on investment over 90 days.

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

W R Berkley  vs.  The Hanover Insurance

W R Berkley

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in W R Berkley are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, W R reported solid returns over the last few months and may actually be approaching a breakup point.

Hanover Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hanover Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with W R and Hanover Insurance

The main advantage of trading using opposite W R and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if W R 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 W R Berkley 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.