Correlation Between Qbe Insurance and Midway
Can any of the company-specific risk be diversified away by investing in both Qbe Insurance and Midway 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 Qbe Insurance and Midway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Qbe Insurance Group and Midway, you can compare the effects of market volatilities on Qbe Insurance and Midway 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 Qbe Insurance with a short position of Midway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qbe Insurance and Midway.
Diversification Opportunities for Qbe Insurance and Midway
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Qbe and Midway is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Qbe Insurance Group and Midway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midway and Qbe Insurance 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 Qbe Insurance Group are associated (or correlated) with Midway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midway has no effect on the direction of Qbe Insurance i.e., Qbe Insurance and Midway go up and down completely randomly.
Pair Corralation between Qbe Insurance and Midway
Assuming the 90 days trading horizon Qbe Insurance is expected to generate 2.1 times less return on investment than Midway. But when comparing it to its historical volatility, Qbe Insurance Group is 6.4 times less risky than Midway. It trades about 0.25 of its potential returns per unit of risk. Midway is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 95.00 in Midway on September 7, 2024 and sell it today you would earn a total of 30.00 from holding Midway or generate 31.58% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Qbe Insurance Group vs. Midway
Performance |
Timeline |
Qbe Insurance Group |
Midway |
Qbe Insurance and Midway Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Qbe Insurance and Midway
The main advantage of trading using opposite Qbe Insurance and Midway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qbe Insurance position performs unexpectedly, Midway 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 Midway will offset losses from the drop in Midway's long position.Qbe Insurance vs. Westpac Banking | Qbe Insurance vs. Ecofibre | Qbe Insurance vs. Champion Iron | Qbe Insurance vs. iShares Global Healthcare |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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