Correlation Between HANOVER INSURANCE and SYSTEMAIR

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

By analyzing existing cross correlation between HANOVER INSURANCE and SYSTEMAIR AB, you can compare the effects of market volatilities on HANOVER INSURANCE and SYSTEMAIR 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 SYSTEMAIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of HANOVER INSURANCE and SYSTEMAIR.

Diversification Opportunities for HANOVER INSURANCE and SYSTEMAIR

0.37

Correlation Coefficient

HANOVER INSURANCE  SYSTEMAIR

Weak diversification

The 3 months correlation between HANOVER and SYSTEMAIR is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding HANOVER INSURANCE and SYSTEMAIR AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SYSTEMAIR AB 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 HANOVER INSURANCE are associated (or correlated) with SYSTEMAIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SYSTEMAIR AB has no effect on the direction of HANOVER INSURANCE i.e., HANOVER INSURANCE and SYSTEMAIR go up and down completely randomly.

Pair Corralation between HANOVER INSURANCE and SYSTEMAIR

Assuming the 90 days trading horizon HANOVER INSURANCE is expected to generate 0.79 times more return on investment than SYSTEMAIR. However, HANOVER INSURANCE is 1.27 times less risky than SYSTEMAIR. It trades about 0.18 of its potential returns per unit of risk. SYSTEMAIR AB is currently generating about 0.11 per unit of risk. If you would invest  13,014  in HANOVER INSURANCE on September 3, 2024 and sell it today you would earn a total of  2,186  from holding HANOVER INSURANCE or generate 16.8% return on investment over 90 days.

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

HANOVER INSURANCE  vs.  SYSTEMAIR AB

HANOVER INSURANCE

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HANOVER INSURANCE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, HANOVER INSURANCE exhibited solid returns over the last few months and may actually be approaching a breakup point.

SYSTEMAIR AB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SYSTEMAIR AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, SYSTEMAIR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HANOVER INSURANCE and SYSTEMAIR

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

The idea behind HANOVER INSURANCE and SYSTEMAIR AB 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.