Correlation Between Hanover Insurance and Teradyne

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Can any of the company-specific risk be diversified away by investing in both Hanover Insurance and Teradyne 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 Teradyne 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 Teradyne, you can compare the effects of market volatilities on Hanover Insurance and Teradyne 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 Teradyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Insurance and Teradyne.

Diversification Opportunities for Hanover Insurance and Teradyne

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between Hanover and Teradyne is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding The Hanover Insurance and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne 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 Teradyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradyne has no effect on the direction of Hanover Insurance i.e., Hanover Insurance and Teradyne go up and down completely randomly.

Pair Corralation between Hanover Insurance and Teradyne

Considering the 90-day investment horizon Hanover Insurance is expected to generate 18.41 times less return on investment than Teradyne. But when comparing it to its historical volatility, The Hanover Insurance is 2.43 times less risky than Teradyne. It trades about 0.02 of its potential returns per unit of risk. Teradyne is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,396  in Teradyne on May 6, 2025 and sell it today you would earn a total of  3,020  from holding Teradyne or generate 40.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

The Hanover Insurance  vs.  Teradyne

 Performance 
       Timeline  
Hanover Insurance 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 1 (%) 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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.
Teradyne 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Teradyne reported solid returns over the last few months and may actually be approaching a breakup point.

Hanover Insurance and Teradyne Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hanover Insurance and Teradyne

The main advantage of trading using opposite Hanover Insurance and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanover Insurance position performs unexpectedly, Teradyne 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 Teradyne will offset losses from the drop in Teradyne's long position.
The idea behind The Hanover Insurance and Teradyne 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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