Correlation Between QBE Insurance and Datang International

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

Diversification Opportunities for QBE Insurance and Datang International

-0.49

Correlation Coefficient

QBE Insurance  Datang International

Very good diversification

The 3 months correlation between QBE and Datang is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Datang International Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang International 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 Datang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang International has no effect on the direction of QBE Insurance i.e., QBE Insurance and Datang International go up and down completely randomly.

Pair Corralation between QBE Insurance and Datang International

Assuming the 90 days horizon QBE Insurance is expected to generate 1.8 times less return on investment than Datang International. But when comparing it to its historical volatility, QBE Insurance Group is 2.43 times less risky than Datang International. It trades about 0.07 of its potential returns per unit of risk. Datang International Power is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Datang International Power on October 5, 2024 and sell it today you would earn a total of  5.00  from holding Datang International Power or generate 41.67% return on investment over 90 days.

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

QBE Insurance Group  vs.  Datang International Power

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.

Datang International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Datang International Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with QBE Insurance and Datang International

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

The idea behind QBE Insurance Group and Datang International Power 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.