Correlation Between QBE Insurance and Freedom Holding
Can any of the company-specific risk be diversified away by investing in both QBE Insurance and Freedom Holding 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 Freedom Holding 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 Freedom Holding Corp, you can compare the effects of market volatilities on QBE Insurance and Freedom Holding 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 Freedom Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of QBE Insurance and Freedom Holding.
Diversification Opportunities for QBE Insurance and Freedom Holding
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between QBE and Freedom is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Freedom Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Holding Corp 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 Freedom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Holding Corp has no effect on the direction of QBE Insurance i.e., QBE Insurance and Freedom Holding go up and down completely randomly.
Pair Corralation between QBE Insurance and Freedom Holding
Assuming the 90 days horizon QBE Insurance is expected to generate 1.4 times less return on investment than Freedom Holding. In addition to that, QBE Insurance is 1.33 times more volatile than Freedom Holding Corp. It trades about 0.04 of its total potential returns per unit of risk. Freedom Holding Corp is currently generating about 0.07 per unit of volatility. If you would invest 6,230 in Freedom Holding Corp on August 31, 2024 and sell it today you would earn a total of 5,613 from holding Freedom Holding Corp or generate 90.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 74.21% |
| Values | Daily Returns |
QBE Insurance Group vs. Freedom Holding Corp
Performance |
| Timeline |
| QBE Insurance Group |
| Freedom Holding Corp |
QBE Insurance and Freedom Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with QBE Insurance and Freedom Holding
The main advantage of trading using opposite QBE Insurance and Freedom Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if QBE Insurance position performs unexpectedly, Freedom Holding 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 Freedom Holding will offset losses from the drop in Freedom Holding's long position.The idea behind QBE Insurance Group and Freedom Holding Corp 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.| Freedom Holding vs. Nomura Holdings ADR | Freedom Holding vs. Scully Royalty | Freedom Holding vs. Oppenheimer Holdings | Freedom Holding vs. Houlihan Lokey |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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