Correlation Between QBE Insurance and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both QBE Insurance and Commonwealth Bank 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 QBE Insurance and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between QBE Insurance Group and Commonwealth Bank of, you can compare the effects of market volatilities on QBE Insurance and Commonwealth Bank 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 QBE Insurance with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of QBE Insurance and Commonwealth Bank.
Diversification Opportunities for QBE Insurance and Commonwealth Bank
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between QBE and Commonwealth is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and QBE 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 QBE Insurance Group are associated (or correlated) with Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of QBE Insurance i.e., QBE Insurance and Commonwealth Bank go up and down completely randomly.
Pair Corralation between QBE Insurance and Commonwealth Bank
Assuming the 90 days horizon QBE Insurance Group is expected to generate 1.06 times more return on investment than Commonwealth Bank. However, QBE Insurance is 1.06 times more volatile than Commonwealth Bank of. It trades about 0.52 of its potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.41 per unit of risk. If you would invest 1,030 in QBE Insurance Group on September 1, 2024 and sell it today you would earn a total of 190.00 from holding QBE Insurance Group or generate 18.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
QBE Insurance Group vs. Commonwealth Bank of
Performance |
| Timeline |
| QBE Insurance Group |
| Commonwealth Bank |
QBE Insurance and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with QBE Insurance and Commonwealth Bank
The main advantage of trading using opposite QBE Insurance and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if QBE Insurance position performs unexpectedly, Commonwealth Bank 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 Commonwealth Bank will offset losses from the drop in Commonwealth Bank's long position.| QBE Insurance vs. Sumitomo Rubber Industries | QBE Insurance vs. SANOK RUBBER ZY | QBE Insurance vs. Applied Materials | QBE Insurance vs. NEWELL RUBBERMAID |
| Commonwealth Bank vs. Playtech plc | Commonwealth Bank vs. CANON MARKETING JP | Commonwealth Bank vs. Carsales | Commonwealth Bank vs. Lion Biotechnologies |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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