Correlation Between QBE Insurance and Eagle Materials
Can any of the company-specific risk be diversified away by investing in both QBE Insurance and Eagle Materials 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 Eagle Materials 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 Eagle Materials, you can compare the effects of market volatilities on QBE Insurance and Eagle Materials 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 Eagle Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of QBE Insurance and Eagle Materials.
Diversification Opportunities for QBE Insurance and Eagle Materials
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between QBE and Eagle is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials 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 Eagle Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Materials has no effect on the direction of QBE Insurance i.e., QBE Insurance and Eagle Materials go up and down completely randomly.
Pair Corralation between QBE Insurance and Eagle Materials
Assuming the 90 days horizon QBE Insurance is expected to generate 2.4 times less return on investment than Eagle Materials. But when comparing it to its historical volatility, QBE Insurance Group is 1.44 times less risky than Eagle Materials. It trades about 0.07 of its potential returns per unit of risk. Eagle Materials is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 21,153 in Eagle Materials on August 29, 2024 and sell it today you would earn a total of 8,447 from holding Eagle Materials or generate 39.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
QBE Insurance Group vs. Eagle Materials
Performance |
| Timeline |
| QBE Insurance Group |
| Eagle Materials |
QBE Insurance and Eagle Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with QBE Insurance and Eagle Materials
The main advantage of trading using opposite QBE Insurance and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if QBE Insurance position performs unexpectedly, Eagle Materials 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 Eagle Materials will offset losses from the drop in Eagle Materials' long position.| QBE Insurance vs. Darden Restaurants | QBE Insurance vs. AIR PRODCHEMICALS | QBE Insurance vs. Japan Tobacco | QBE Insurance vs. Strategic Education |
| Eagle Materials vs. Daikin IndustriesLtd | Eagle Materials vs. Vulcan Materials | Eagle Materials vs. Anhui Conch Cement | Eagle Materials vs. Superior Plus Corp |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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