Correlation Between Hanover Insurance and Chubb

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

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

Diversification Opportunities for Hanover Insurance and Chubb

0.81

Correlation Coefficient

Hanover Insurance  Chubb

Very poor diversification

The 3 months correlation between Hanover and Chubb is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb 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 The Hanover Insurance are associated (or correlated) with Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Chubb go up and down completely randomly.

Pair Corralation between Hanover Insurance and Chubb

Considering the 90-day investment horizon The Hanover Insurance is expected to generate 1.17 times more return on investment than Chubb. However, Hanover Insurance is 1.17 times more volatile than Chubb. It trades about 0.1 of its potential returns per unit of risk. Chubb is currently generating about 0.04 per unit of risk. If you would invest  11,952  in The Hanover Insurance on March 23, 2025 and sell it today you would earn a total of  4,740  from holding The Hanover Insurance or generate 39.66% return on investment over 90 days.

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

The Hanover Insurance  vs.  Chubb

Hanover Insurance

Risk-Adjusted Performance

Very Weak

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 technical indicators, Hanover Insurance is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Chubb

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hanover Insurance and Chubb

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

The idea behind The Hanover Insurance and Chubb 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..