Correlation Between Central Japan and QBE Insurance

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

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

Diversification Opportunities for Central Japan and QBE Insurance

-0.48

Correlation Coefficient

Central Japan  QBE Insurance

Very good diversification

The 3 months correlation between Central and QBE is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Central Japan Railway 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 Central Japan 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 Central Japan Railway 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 Central Japan i.e., Central Japan and QBE Insurance go up and down completely randomly.

Pair Corralation between Central Japan and QBE Insurance

Assuming the 90 days horizon Central Japan Railway is expected to under-perform the QBE Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Central Japan Railway is 1.02 times less risky than QBE Insurance. The stock trades about -0.05 of its potential returns per unit of risk. The QBE Insurance Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  813.00  in QBE Insurance Group on October 5, 2024 and sell it today you would earn a total of  337.00  from holding QBE Insurance Group or generate 41.45% return on investment over 90 days.

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

Central Japan Railway  vs.  QBE Insurance Group

Central Japan Railway

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Japan Railway has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

QBE Insurance Group

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days QBE Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, QBE Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Central Japan and QBE Insurance

The main advantage of trading using opposite Central Japan and QBE Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Japan 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 Central Japan Railway 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.