Correlation Between CDN IMPERIAL and QBE Insurance

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

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

Diversification Opportunities for CDN IMPERIAL and QBE Insurance

0.93

Correlation Coefficient

CDN IMPERIAL  QBE Insurance

Almost no diversification

The 3 months correlation between CDN and QBE is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK 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 CDN IMPERIAL 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 CDN IMPERIAL BANK 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 CDN IMPERIAL i.e., CDN IMPERIAL and QBE Insurance go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and QBE Insurance

Assuming the 90 days trading horizon CDN IMPERIAL is expected to generate 1.29 times less return on investment than QBE Insurance. But when comparing it to its historical volatility, CDN IMPERIAL BANK is 1.7 times less risky than QBE Insurance. It trades about 0.34 of its potential returns per unit of risk. QBE Insurance Group is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  975.00  in QBE Insurance Group on September 3, 2024 and sell it today you would earn a total of  245.00  from holding QBE Insurance Group or generate 25.13% return on investment over 90 days.

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

CDN IMPERIAL BANK  vs.  QBE Insurance Group

CDN IMPERIAL BANK

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward indicators, CDN IMPERIAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

QBE Insurance Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 20 (%) 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 CDN IMPERIAL and QBE Insurance

The main advantage of trading using opposite CDN IMPERIAL and QBE Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDN IMPERIAL 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 CDN IMPERIAL BANK 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.