Correlation Between QBE Insurance and Toyota Tsusho

Can any of the company-specific risk be diversified away by investing in both QBE Insurance and Toyota Tsusho 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 Toyota Tsusho 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 Toyota Tsusho Corp, you can compare the effects of market volatilities on QBE Insurance and Toyota Tsusho 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 Toyota Tsusho. Check out your portfolio center. Please also check ongoing floating volatility patterns of QBE Insurance and Toyota Tsusho.

Diversification Opportunities for QBE Insurance and Toyota Tsusho

-0.38

Correlation Coefficient

QBE Insurance  Toyota Tsusho

Very good diversification

The 3 months correlation between QBE and Toyota is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Toyota Tsusho Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Tsusho Corp 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 Toyota Tsusho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Tsusho Corp has no effect on the direction of QBE Insurance i.e., QBE Insurance and Toyota Tsusho go up and down completely randomly.

Pair Corralation between QBE Insurance and Toyota Tsusho

Assuming the 90 days horizon QBE Insurance Group is expected to generate 0.73 times more return on investment than Toyota Tsusho. However, QBE Insurance Group is 1.37 times less risky than Toyota Tsusho. It trades about 0.07 of its potential returns per unit of risk. Toyota Tsusho Corp is currently generating about 0.0 per unit of risk. If you would invest  1,220  in QBE Insurance Group on December 4, 2024 and sell it today you would earn a total of  60.00  from holding QBE Insurance Group or generate 4.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

QBE Insurance Group  vs.  Toyota Tsusho Corp

QBE Insurance Group

Risk-Adjusted Performance

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 stable basic indicators, QBE Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Toyota Tsusho Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toyota Tsusho Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Toyota Tsusho is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with QBE Insurance and Toyota Tsusho

The main advantage of trading using opposite QBE Insurance and Toyota Tsusho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if QBE Insurance position performs unexpectedly, Toyota Tsusho 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 Toyota Tsusho will offset losses from the drop in Toyota Tsusho's long position.

The idea behind QBE Insurance Group and Toyota Tsusho Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.