Correlation Between HANOVER INSURANCE and AES

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

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

Diversification Opportunities for HANOVER INSURANCE and AES

-0.8

Correlation Coefficient

HANOVER INSURANCE  AES

Pay attention - limited upside

The 3 months correlation between HANOVER and AES is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding HANOVER INSURANCE and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES and HANOVER INSURANCE 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 HANOVER INSURANCE are associated (or correlated) with AES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES has no effect on the direction of HANOVER INSURANCE i.e., HANOVER INSURANCE and AES go up and down completely randomly.

Pair Corralation between HANOVER INSURANCE and AES

Assuming the 90 days trading horizon HANOVER INSURANCE is expected to generate 0.58 times more return on investment than AES. However, HANOVER INSURANCE is 1.73 times less risky than AES. It trades about 0.16 of its potential returns per unit of risk. The AES is currently generating about -0.11 per unit of risk. If you would invest  11,536  in HANOVER INSURANCE on September 3, 2024 and sell it today you would earn a total of  3,664  from holding HANOVER INSURANCE or generate 31.76% return on investment over 90 days.

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

HANOVER INSURANCE  vs.  The AES

HANOVER INSURANCE

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HANOVER INSURANCE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, HANOVER INSURANCE exhibited solid returns over the last few months and may actually be approaching a breakup point.

AES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The AES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with HANOVER INSURANCE and AES

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

The idea behind HANOVER INSURANCE and The AES 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.