Correlation Between Analog Devices and QBE Insurance

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

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

Diversification Opportunities for Analog Devices and QBE Insurance

0.09

Correlation Coefficient

Analog Devices  QBE Insurance

Significant diversification

The 3 months correlation between Analog and QBE is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices 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 Analog Devices 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 Analog Devices 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 Analog Devices i.e., Analog Devices and QBE Insurance go up and down completely randomly.

Pair Corralation between Analog Devices and QBE Insurance

Considering the 90-day investment horizon Analog Devices is expected to under-perform the QBE Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Analog Devices is 1.45 times less risky than QBE Insurance. The stock trades about -0.01 of its potential returns per unit of risk. The QBE Insurance Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,190  in QBE Insurance Group on December 27, 2024 and sell it today you would earn a total of  247.00  from holding QBE Insurance Group or generate 20.76% return on investment over 90 days.

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

Analog Devices  vs.  QBE Insurance Group

Analog Devices

Risk-Adjusted Performance

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

QBE Insurance Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, QBE Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Analog Devices and QBE Insurance

The main advantage of trading using opposite Analog Devices and QBE Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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 Analog Devices 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.