Correlation Between Hannover and Siriuspoint

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

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

Diversification Opportunities for Hannover and Siriuspoint

-0.36

Correlation Coefficient

Hannover  Siriuspoint

Very good diversification

The 3 months correlation between Hannover and Siriuspoint is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Hannover Re and Siriuspoint in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siriuspoint 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 Siriuspoint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siriuspoint has no effect on the direction of Hannover i.e., Hannover and Siriuspoint go up and down completely randomly.

Pair Corralation between Hannover and Siriuspoint

Assuming the 90 days horizon Hannover Re is expected to under-perform the Siriuspoint. But the pink sheet apears to be less risky and, when comparing its historical volatility, Hannover Re is 1.56 times less risky than Siriuspoint. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Siriuspoint is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,425  in Siriuspoint on September 19, 2024 and sell it today you would earn a total of  89.00  from holding Siriuspoint or generate 6.25% return on investment over 90 days.

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

Hannover Re  vs.  Siriuspoint

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.

Siriuspoint

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Siriuspoint are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Siriuspoint may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hannover and Siriuspoint

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

The idea behind Hannover Re and Siriuspoint 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.