Correlation Between Citizens Financial and QBE Insurance

Can any of the company-specific risk be diversified away by investing in both Citizens Financial and QBE Insurance 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 Citizens Financial and QBE Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citizens Financial Group and QBE Insurance Group, you can compare the effects of market volatilities on Citizens Financial and QBE Insurance 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 Citizens Financial with a short position of QBE Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and QBE Insurance.

Diversification Opportunities for Citizens Financial and QBE Insurance

0.95

Correlation Coefficient

Citizens Financial  QBE Insurance

Almost no diversification

The 3 months correlation between Citizens and QBE is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and QBE Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QBE Insurance Group and Citizens Financial 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 Citizens Financial Group are associated (or correlated) with QBE Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QBE Insurance Group has no effect on the direction of Citizens Financial i.e., Citizens Financial and QBE Insurance go up and down completely randomly.

Pair Corralation between Citizens Financial and QBE Insurance

Assuming the 90 days horizon Citizens Financial Group is expected to under-perform the QBE Insurance. In addition to that, Citizens Financial is 1.02 times more volatile than QBE Insurance Group. It trades about -0.33 of its total potential returns per unit of risk. QBE Insurance Group is currently generating about -0.24 per unit of volatility. If you would invest  1,220  in QBE Insurance Group on September 30, 2024 and sell it today you would lose (70.00) from holding QBE Insurance Group or give up 5.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Citizens Financial Group  vs.  QBE Insurance Group

Citizens Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Citizens Financial reported solid returns over the last few months and may actually be approaching a breakup point.

QBE Insurance Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, QBE Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citizens Financial and QBE Insurance

The main advantage of trading using opposite Citizens Financial and QBE Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens Financial position performs unexpectedly, QBE Insurance 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 QBE Insurance will offset losses from the drop in QBE Insurance's long position.

The idea behind Citizens Financial Group and QBE Insurance Group 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.