Correlation Between Maiden Holdings and Hannover

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

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

Diversification Opportunities for Maiden Holdings and Hannover

0.08

Correlation Coefficient

Maiden Holdings  Hannover

Significant diversification

The 3 months correlation between Maiden and Hannover is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Maiden Holdings and Hannover Re in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannover Re and Maiden Holdings 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 Maiden Holdings are associated (or correlated) with Hannover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannover Re has no effect on the direction of Maiden Holdings i.e., Maiden Holdings and Hannover go up and down completely randomly.

Pair Corralation between Maiden Holdings and Hannover

Given the investment horizon of 90 days Maiden Holdings is expected to generate 3.13 times more return on investment than Hannover. However, Maiden Holdings is 3.13 times more volatile than Hannover Re. It trades about -0.02 of its potential returns per unit of risk. Hannover Re is currently generating about -0.06 per unit of risk. If you would invest  149.00  in Maiden Holdings on September 19, 2024 and sell it today you would lose (14.00) from holding Maiden Holdings or give up 9.4% of portfolio value over 90 days.

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

Maiden Holdings  vs.  Hannover Re

Maiden Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maiden Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Maiden Holdings is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Maiden Holdings and Hannover

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

The idea behind Maiden Holdings and Hannover Re 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 Transaction History module to view history of all your transactions and understand their impact on performance.