Correlation Between QBE Insurance and COMMONWBK AUSTRSPADRS
Can any of the company-specific risk be diversified away by investing in both QBE Insurance and COMMONWBK AUSTRSPADRS 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 COMMONWBK AUSTRSPADRS 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 COMMONWBK AUSTRSPADRS, you can compare the effects of market volatilities on QBE Insurance and COMMONWBK AUSTRSPADRS 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 COMMONWBK AUSTRSPADRS. Check out your portfolio center. Please also check ongoing floating volatility patterns of QBE Insurance and COMMONWBK AUSTRSPADRS.
Diversification Opportunities for QBE Insurance and COMMONWBK AUSTRSPADRS
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between QBE and COMMONWBK is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and COMMONWBK AUSTRSPADRS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMONWBK AUSTRSPADRS 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 COMMONWBK AUSTRSPADRS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMONWBK AUSTRSPADRS has no effect on the direction of QBE Insurance i.e., QBE Insurance and COMMONWBK AUSTRSPADRS go up and down completely randomly.
Pair Corralation between QBE Insurance and COMMONWBK AUSTRSPADRS
Assuming the 90 days horizon QBE Insurance Group is expected to generate 1.0 times more return on investment than COMMONWBK AUSTRSPADRS. However, QBE Insurance Group is 1.0 times less risky than COMMONWBK AUSTRSPADRS. It trades about 0.18 of its potential returns per unit of risk. COMMONWBK AUSTRSPADRS is currently generating about 0.18 per unit of risk. If you would invest 1,130 in QBE Insurance Group on September 12, 2024 and sell it today you would earn a total of 50.00 from holding QBE Insurance Group or generate 4.42% 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. COMMONWBK AUSTRSPADRS
Performance |
| Timeline |
| QBE Insurance Group |
| COMMONWBK AUSTRSPADRS |
QBE Insurance and COMMONWBK AUSTRSPADRS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with QBE Insurance and COMMONWBK AUSTRSPADRS
The main advantage of trading using opposite QBE Insurance and COMMONWBK AUSTRSPADRS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if QBE Insurance position performs unexpectedly, COMMONWBK AUSTRSPADRS 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 COMMONWBK AUSTRSPADRS will offset losses from the drop in COMMONWBK AUSTRSPADRS's long position.| QBE Insurance vs. Insurance Australia Group | QBE Insurance vs. Superior Plus Corp | QBE Insurance vs. SIVERS SEMICONDUCTORS AB | QBE Insurance vs. CHINA HUARONG ENERHD 50 |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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