Correlation Between Schibsted ASA and HANOVER INSURANCE

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

By analyzing existing cross correlation between Schibsted ASA A and HANOVER INSURANCE, you can compare the effects of market volatilities on Schibsted ASA 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 Schibsted ASA with a short position of HANOVER INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schibsted ASA and HANOVER INSURANCE.

Diversification Opportunities for Schibsted ASA and HANOVER INSURANCE

0.78

Correlation Coefficient

Schibsted ASA  HANOVER INSURANCE

Poor diversification

The 3 months correlation between Schibsted and HANOVER is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Schibsted ASA A and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE and Schibsted ASA 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 Schibsted ASA A 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 Schibsted ASA i.e., Schibsted ASA and HANOVER INSURANCE go up and down completely randomly.

Pair Corralation between Schibsted ASA and HANOVER INSURANCE

Assuming the 90 days horizon Schibsted ASA A is expected to generate 2.22 times more return on investment than HANOVER INSURANCE. However, Schibsted ASA is 2.22 times more volatile than HANOVER INSURANCE. It trades about 0.08 of its potential returns per unit of risk. HANOVER INSURANCE is currently generating about 0.03 per unit of risk. If you would invest  994.00  in Schibsted ASA A on September 28, 2024 and sell it today you would earn a total of  1,950  from holding Schibsted ASA A or generate 196.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Schibsted ASA A  vs.  HANOVER INSURANCE

Schibsted ASA A

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Schibsted ASA A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Schibsted ASA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

HANOVER INSURANCE

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HANOVER INSURANCE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, HANOVER INSURANCE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Schibsted ASA and HANOVER INSURANCE

The main advantage of trading using opposite Schibsted ASA and HANOVER INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schibsted ASA 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 Schibsted ASA A and 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.