Correlation Between Hannover and Hannover Rck

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

By analyzing existing cross correlation between Hannover Re and Hannover Rck SE, you can compare the effects of market volatilities on Hannover and Hannover Rck 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 Hannover with a short position of Hannover Rck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hannover and Hannover Rck.

Diversification Opportunities for Hannover and Hannover Rck

-0.69

Correlation Coefficient

Hannover  Hannover Rck

Excellent diversification

The 3 months correlation between Hannover and Hannover is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hannover Re and Hannover Rck SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannover Rck SE and Hannover 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 Hannover Re are associated (or correlated) with Hannover Rck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannover Rck SE has no effect on the direction of Hannover i.e., Hannover and Hannover Rck go up and down completely randomly.

Pair Corralation between Hannover and Hannover Rck

Assuming the 90 days horizon Hannover is expected to generate 1.49 times less return on investment than Hannover Rck. But when comparing it to its historical volatility, Hannover Re is 1.44 times less risky than Hannover Rck. It trades about 0.07 of its potential returns per unit of risk. Hannover Rck SE is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  14,575  in Hannover Rck SE on September 19, 2024 and sell it today you would earn a total of  11,730  from holding Hannover Rck SE or generate 80.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Hannover Re  vs.  Hannover Rck SE

Hannover Re

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hannover Re has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Hannover is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Hannover Rck SE

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Hannover and Hannover Rck

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

The idea behind Hannover Re and Hannover Rck SE 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.