Correlation Between HANOVER INSURANCE and TAL Education

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

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

Diversification Opportunities for HANOVER INSURANCE and TAL Education

0.34

Correlation Coefficient

HANOVER INSURANCE  TAL Education

Weak diversification

The 3 months correlation between HANOVER and TAL is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding HANOVER INSURANCE and TAL Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAL Education Group 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 TAL Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAL Education Group has no effect on the direction of HANOVER INSURANCE i.e., HANOVER INSURANCE and TAL Education go up and down completely randomly.

Pair Corralation between HANOVER INSURANCE and TAL Education

Assuming the 90 days trading horizon HANOVER INSURANCE is expected to generate 2.1 times less return on investment than TAL Education. But when comparing it to its historical volatility, HANOVER INSURANCE is 3.21 times less risky than TAL Education. It trades about 0.18 of its potential returns per unit of risk. TAL Education Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  710.00  in TAL Education Group on September 5, 2024 and sell it today you would earn a total of  220.00  from holding TAL Education Group or generate 30.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

HANOVER INSURANCE  vs.  TAL Education Group

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.

TAL Education Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TAL Education unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HANOVER INSURANCE and TAL Education

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

The idea behind HANOVER INSURANCE and TAL Education Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.