Correlation Between QBE Insurance and Direct Line
Can any of the company-specific risk be diversified away by investing in both QBE Insurance and Direct Line 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 Direct Line 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 Direct Line Insurance, you can compare the effects of market volatilities on QBE Insurance and Direct Line 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 Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of QBE Insurance and Direct Line.
Diversification Opportunities for QBE Insurance and Direct Line
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between QBE and Direct is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line Insurance 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 Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of QBE Insurance i.e., QBE Insurance and Direct Line go up and down completely randomly.
Pair Corralation between QBE Insurance and Direct Line
Assuming the 90 days horizon QBE Insurance is expected to generate 1.69 times less return on investment than Direct Line. But when comparing it to its historical volatility, QBE Insurance Group is 1.19 times less risky than Direct Line. It trades about 0.04 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 787.00 in Direct Line Insurance on September 12, 2024 and sell it today you would earn a total of 466.00 from holding Direct Line Insurance or generate 59.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 70.25% |
| Values | Daily Returns |
QBE Insurance Group vs. Direct Line Insurance
Performance |
| Timeline |
| QBE Insurance Group |
| Direct Line Insurance |
QBE Insurance and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with QBE Insurance and Direct Line
The main advantage of trading using opposite QBE Insurance and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if QBE Insurance position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.| QBE Insurance vs. Root Inc | QBE Insurance vs. Bank of America | QBE Insurance vs. Aerovate Therapeutics | QBE Insurance vs. SoundHound AI |
| Direct Line vs. Berkshire Hathaway | Direct Line vs. Berkshire Hathaway | Direct Line vs. Zurich Insurance Group | Direct Line vs. Zurich Insurance Group |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |