Correlation Between Star Diamond and Hanover Insurance

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Can any of the company-specific risk be diversified away by investing in both Star Diamond 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 Star Diamond and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Star Diamond and The Hanover Insurance, you can compare the effects of market volatilities on Star Diamond 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 Star Diamond with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Star Diamond and Hanover Insurance.

Diversification Opportunities for Star Diamond and Hanover Insurance

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Star and Hanover is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Star Diamond and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and Star Diamond 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 Star Diamond 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 Star Diamond i.e., Star Diamond and Hanover Insurance go up and down completely randomly.

Pair Corralation between Star Diamond and Hanover Insurance

Assuming the 90 days horizon Star Diamond is expected to generate 3.93 times more return on investment than Hanover Insurance. However, Star Diamond is 3.93 times more volatile than The Hanover Insurance. It trades about 0.02 of its potential returns per unit of risk. The Hanover Insurance is currently generating about 0.0 per unit of risk. If you would invest  3.15  in Star Diamond on April 23, 2025 and sell it today you would lose (0.20) from holding Star Diamond or give up 6.35% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.44%
ValuesDaily Returns

Star Diamond  vs.  The Hanover Insurance

 Performance 
       Timeline  
Star Diamond 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Star Diamond are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Star Diamond may actually be approaching a critical reversion point that can send shares even higher in August 2025.
Hanover Insurance 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Over the last 90 days The Hanover Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hanover Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Star Diamond and Hanover Insurance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Star Diamond and Hanover Insurance

The main advantage of trading using opposite Star Diamond and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Star Diamond 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 Star Diamond 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.
Check out your portfolio center.
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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