Correlation Between Alcoa Corp and QBE Insurance
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and QBE 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 Alcoa Corp and QBE Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and QBE Insurance Group, you can compare the effects of market volatilities on Alcoa Corp and QBE 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 Alcoa Corp with a short position of QBE Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and QBE Insurance.
Diversification Opportunities for Alcoa Corp and QBE Insurance
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alcoa and QBE is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and QBE Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QBE Insurance Group and Alcoa Corp 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 Alcoa Corp are associated (or correlated) with QBE Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QBE Insurance Group has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and QBE Insurance go up and down completely randomly.
Pair Corralation between Alcoa Corp and QBE Insurance
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.76 times more return on investment than QBE Insurance. However, Alcoa Corp is 1.76 times more volatile than QBE Insurance Group. It trades about 0.1 of its potential returns per unit of risk. QBE Insurance Group is currently generating about 0.08 per unit of risk. If you would invest 2,653 in Alcoa Corp on September 1, 2024 and sell it today you would earn a total of 1,990 from holding Alcoa Corp or generate 75.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.52% |
| Values | Daily Returns |
Alcoa Corp vs. QBE Insurance Group
Performance |
| Timeline |
| Alcoa Corp |
| QBE Insurance Group |
Alcoa Corp and QBE Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and QBE Insurance
The main advantage of trading using opposite Alcoa Corp and QBE Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, QBE 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 QBE Insurance will offset losses from the drop in QBE Insurance's long position.| Alcoa Corp vs. Fortitude Gold Corp | Alcoa Corp vs. New Gold | Alcoa Corp vs. Galiano Gold | Alcoa Corp vs. GoldMining |
| QBE Insurance vs. Heritage Insurance Hldgs | QBE Insurance vs. Universal Insurance Holdings | QBE Insurance vs. Kingstone Companies | QBE Insurance vs. HCI Group |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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