Correlation Between QBE Insurance and Align Technology

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

Diversification Opportunities for QBE Insurance and Align Technology

0.22

Correlation Coefficient

QBE Insurance  Align Technology

Modest diversification

The 3 months correlation between QBE and Align is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology 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 Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of QBE Insurance i.e., QBE Insurance and Align Technology go up and down completely randomly.

Pair Corralation between QBE Insurance and Align Technology

Assuming the 90 days horizon QBE Insurance is expected to generate 37.86 times less return on investment than Align Technology. But when comparing it to its historical volatility, QBE Insurance Group is 1.15 times less risky than Align Technology. It trades about 0.01 of its potential returns per unit of risk. Align Technology is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  20,960  in Align Technology on September 15, 2024 and sell it today you would earn a total of  1,570  from holding Align Technology or generate 7.49% return on investment over 90 days.

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

QBE Insurance Group  vs.  Align Technology

QBE Insurance Group

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, QBE Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Align Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Align Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with QBE Insurance and Align Technology

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

The idea behind QBE Insurance Group and Align Technology 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.