Correlation Between Hertz Global and QBE Insurance

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

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

Diversification Opportunities for Hertz Global and QBE Insurance

0.67

Correlation Coefficient

Hertz Global  QBE Insurance

Poor diversification

The 3 months correlation between Hertz and QBE is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings 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 Hertz Global 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 Hertz Global Holdings 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 Hertz Global i.e., Hertz Global and QBE Insurance go up and down completely randomly.

Pair Corralation between Hertz Global and QBE Insurance

Considering the 90-day investment horizon Hertz Global Holdings is expected to under-perform the QBE Insurance. In addition to that, Hertz Global is 1.3 times more volatile than QBE Insurance Group. It trades about -0.05 of its total potential returns per unit of risk. QBE Insurance Group is currently generating about 0.04 per unit of volatility. If you would invest  926.00  in QBE Insurance Group on October 5, 2024 and sell it today you would earn a total of  264.00  from holding QBE Insurance Group or generate 28.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	75.1%
Values	Daily Returns

Hertz Global Holdings  vs.  QBE Insurance Group

Hertz Global Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hertz Global showed solid returns over the last few months and may actually be approaching a breakup point.

QBE Insurance Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, QBE Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hertz Global and QBE Insurance

The main advantage of trading using opposite Hertz Global and QBE Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hertz Global 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 Hertz Global Holdings 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.