Correlation Between QBE Insurance and Balchem
Can any of the company-specific risk be diversified away by investing in both QBE Insurance and Balchem 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 Balchem 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 Balchem, you can compare the effects of market volatilities on QBE Insurance and Balchem 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 Balchem. Check out your portfolio center. Please also check ongoing floating volatility patterns of QBE Insurance and Balchem.
Diversification Opportunities for QBE Insurance and Balchem
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between QBE and Balchem is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem 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 Balchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balchem has no effect on the direction of QBE Insurance i.e., QBE Insurance and Balchem go up and down completely randomly.
Pair Corralation between QBE Insurance and Balchem
Assuming the 90 days horizon QBE Insurance is expected to generate 1.56 times less return on investment than Balchem. But when comparing it to its historical volatility, QBE Insurance Group is 1.67 times less risky than Balchem. It trades about 0.22 of its potential returns per unit of risk. Balchem is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 17,079 in Balchem on August 28, 2024 and sell it today you would earn a total of 1,190 from holding Balchem or generate 6.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
QBE Insurance Group vs. Balchem
Performance |
| Timeline |
| QBE Insurance Group |
| Balchem |
QBE Insurance and Balchem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with QBE Insurance and Balchem
The main advantage of trading using opposite QBE Insurance and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if QBE Insurance position performs unexpectedly, Balchem 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 Balchem will offset losses from the drop in Balchem's long position.The idea behind QBE Insurance Group and Balchem pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Balchem vs. Sensient Technologies | Balchem vs. Innospec | Balchem vs. Minerals Technologies | Balchem vs. Oil Dri |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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