Correlation Between QBE Insurance and Bayer AG

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

Diversification Opportunities for QBE Insurance and Bayer AG

-0.9

Correlation Coefficient

QBE Insurance  Bayer AG

Pay attention - limited upside

The 3 months correlation between QBE and Bayer is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Bayer AG NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG NA 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 Bayer AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayer AG NA has no effect on the direction of QBE Insurance i.e., QBE Insurance and Bayer AG go up and down completely randomly.

Pair Corralation between QBE Insurance and Bayer AG

Assuming the 90 days horizon QBE Insurance Group is expected to generate 0.78 times more return on investment than Bayer AG. However, QBE Insurance Group is 1.28 times less risky than Bayer AG. It trades about 0.06 of its potential returns per unit of risk. Bayer AG NA is currently generating about -0.1 per unit of risk. If you would invest  766.00  in QBE Insurance Group on October 5, 2024 and sell it today you would earn a total of  384.00  from holding QBE Insurance Group or generate 50.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

QBE Insurance Group  vs.  Bayer AG NA

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.

Bayer AG NA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayer AG NA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with QBE Insurance and Bayer AG

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

The idea behind QBE Insurance Group and Bayer AG NA 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 Commodity Directory module to find actively traded commodities issued by global exchanges.