Correlation Between QBE Insurance and Warner Music
Can any of the company-specific risk be diversified away by investing in both QBE Insurance and Warner Music 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 Warner Music 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 Warner Music Group, you can compare the effects of market volatilities on QBE Insurance and Warner Music 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 Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of QBE Insurance and Warner Music.
Diversification Opportunities for QBE Insurance and Warner Music
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between QBE and Warner is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of QBE Insurance i.e., QBE Insurance and Warner Music go up and down completely randomly.
Pair Corralation between QBE Insurance and Warner Music
Assuming the 90 days horizon QBE Insurance is expected to generate 1.04 times less return on investment than Warner Music. But when comparing it to its historical volatility, QBE Insurance Group is 1.15 times less risky than Warner Music. It trades about 0.2 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,528 in Warner Music Group on September 12, 2024 and sell it today you would earn a total of 485.00 from holding Warner Music Group or generate 19.19% 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. Warner Music Group
Performance |
| Timeline |
| QBE Insurance Group |
| Warner Music Group |
QBE Insurance and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with QBE Insurance and Warner Music
The main advantage of trading using opposite QBE Insurance and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if QBE Insurance position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music'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 |
| Warner Music vs. The Walt Disney | Warner Music vs. Charter Communications | Warner Music vs. Superior Plus Corp | Warner Music vs. SIVERS SEMICONDUCTORS AB |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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