Correlation Between LATAM Airlines and Hanover Insurance
Can any of the company-specific risk be diversified away by investing in both LATAM Airlines 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 LATAM Airlines and Hanover Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LATAM Airlines Group and The Hanover Insurance, you can compare the effects of market volatilities on LATAM Airlines 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 LATAM Airlines with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of LATAM Airlines and Hanover Insurance.
Diversification Opportunities for LATAM Airlines and Hanover Insurance
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between LATAM and Hanover is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and LATAM Airlines 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 LATAM Airlines Group 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 LATAM Airlines i.e., LATAM Airlines and Hanover Insurance go up and down completely randomly.
Pair Corralation between LATAM Airlines and Hanover Insurance
Considering the 90-day investment horizon LATAM Airlines Group is expected to generate 1.49 times more return on investment than Hanover Insurance. However, LATAM Airlines is 1.49 times more volatile than The Hanover Insurance. It trades about 0.07 of its potential returns per unit of risk. The Hanover Insurance is currently generating about 0.06 per unit of risk. If you would invest 4,113 in LATAM Airlines Group on July 20, 2025 and sell it today you would earn a total of 345.00 from holding LATAM Airlines Group or generate 8.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LATAM Airlines Group vs. The Hanover Insurance
Performance |
| Timeline |
| LATAM Airlines Group |
| Hanover Insurance |
LATAM Airlines and Hanover Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LATAM Airlines and Hanover Insurance
The main advantage of trading using opposite LATAM Airlines and Hanover Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LATAM Airlines 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.| LATAM Airlines vs. Ryanair Holdings PLC | LATAM Airlines vs. Grupo Aeroportuario del | LATAM Airlines vs. JB Hunt Transport | LATAM Airlines vs. Grupo Aeroportuario del |
| Hanover Insurance vs. Horace Mann Educators | Hanover Insurance vs. Kemper | Hanover Insurance vs. RLI Corp | Hanover Insurance vs. Global Indemnity PLC |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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