Correlation Between Papaya Growth and QBE Insurance

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

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

Diversification Opportunities for Papaya Growth and QBE Insurance

-0.14

Correlation Coefficient

Papaya Growth  QBE Insurance

Good diversification

The 3 months correlation between Papaya and QBE is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Papaya Growth Opportunity 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 Papaya Growth 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 Papaya Growth Opportunity 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 Papaya Growth i.e., Papaya Growth and QBE Insurance go up and down completely randomly.

Pair Corralation between Papaya Growth and QBE Insurance

Assuming the 90 days horizon Papaya Growth is expected to generate 4.5 times less return on investment than QBE Insurance. But when comparing it to its historical volatility, Papaya Growth Opportunity is 7.42 times less risky than QBE Insurance. It trades about 0.15 of its potential returns per unit of risk. QBE Insurance Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,115  in QBE Insurance Group on September 27, 2024 and sell it today you would earn a total of  75.00  from holding QBE Insurance Group or generate 6.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

Papaya Growth Opportunity  vs.  QBE Insurance Group

Papaya Growth Opportunity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Papaya Growth Opportunity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Papaya Growth is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

QBE Insurance Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 5 (%) 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 January 2025.

Pair Trading with Papaya Growth and QBE Insurance

The main advantage of trading using opposite Papaya Growth and QBE Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Papaya Growth 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 Papaya Growth Opportunity 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.