Correlation Between Ladder and Hanover Insurance

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

By analyzing existing cross correlation between Ladder Capital Finance and The Hanover Insurance, you can compare the effects of market volatilities on Ladder and Hanover Insurance 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 Ladder with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ladder and Hanover Insurance.

Diversification Opportunities for Ladder and Hanover Insurance

-0.02

Correlation Coefficient

Ladder  Hanover Insurance

Good diversification

The 3 months correlation between Ladder and Hanover is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ladder Capital Finance and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Ladder 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 Ladder Capital Finance are associated (or correlated) with Hanover Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Insurance has no effect on the direction of Ladder i.e., Ladder and Hanover Insurance go up and down completely randomly.

Pair Corralation between Ladder and Hanover Insurance

Assuming the 90 days trading horizon Ladder Capital Finance is expected to under-perform the Hanover Insurance. But the bond apears to be less risky and, when comparing its historical volatility, Ladder Capital Finance is 1.01 times less risky than Hanover Insurance. The bond trades about -0.06 of its potential returns per unit of risk. The The Hanover Insurance is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  14,847  in The Hanover Insurance on September 14, 2024 and sell it today you would earn a total of  668.00  from holding The Hanover Insurance or generate 4.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	67.19%
Values	Daily Returns

Ladder Capital Finance  vs.  The Hanover Insurance

Ladder Capital Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ladder Capital Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ladder is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hanover Insurance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Hanover Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ladder and Hanover Insurance

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

The idea behind Ladder Capital Finance and The Hanover Insurance 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.