Correlation Between Australian Dairy and Qbe Insurance
Can any of the company-specific risk be diversified away by investing in both Australian Dairy 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 Australian Dairy and Qbe Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Dairy Farms and Qbe Insurance Group, you can compare the effects of market volatilities on Australian Dairy 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 Australian Dairy with a short position of Qbe Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Dairy and Qbe Insurance.
Diversification Opportunities for Australian Dairy and Qbe Insurance
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Australian and Qbe is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Australian Dairy Farms 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 Australian Dairy 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 Australian Dairy Farms 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 Australian Dairy i.e., Australian Dairy and Qbe Insurance go up and down completely randomly.
Pair Corralation between Australian Dairy and Qbe Insurance
Assuming the 90 days trading horizon Australian Dairy Farms is expected to generate 8.76 times more return on investment than Qbe Insurance. However, Australian Dairy is 8.76 times more volatile than Qbe Insurance Group. It trades about 0.2 of its potential returns per unit of risk. Qbe Insurance Group is currently generating about 0.17 per unit of risk. If you would invest 5.80 in Australian Dairy Farms on October 24, 2024 and sell it today you would earn a total of 1.70 from holding Australian Dairy Farms or generate 29.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Dairy Farms vs. Qbe Insurance Group
Performance |
| Timeline |
| Australian Dairy Farms |
| Qbe Insurance Group |
Australian Dairy and Qbe Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Dairy and Qbe Insurance
The main advantage of trading using opposite Australian Dairy and Qbe Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Dairy 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.| Australian Dairy vs. FireFly Metals | Australian Dairy vs. Charter Hall Education | Australian Dairy vs. Home Consortium | Australian Dairy vs. Land Homes Group |
| Qbe Insurance vs. Dalaroo Metals | Qbe Insurance vs. Truscott Mining Corp | Qbe Insurance vs. Sports Entertainment Group | Qbe Insurance vs. Group 6 Metals |
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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