Correlation Between QBE Insurance and Chiba Bank

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

Diversification Opportunities for QBE Insurance and Chiba Bank

0.77

Correlation Coefficient

QBE Insurance  Chiba Bank

Poor diversification

The 3 months correlation between QBE and Chiba is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Chiba Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chiba Bank 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 Chiba Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chiba Bank has no effect on the direction of QBE Insurance i.e., QBE Insurance and Chiba Bank go up and down completely randomly.

Pair Corralation between QBE Insurance and Chiba Bank

Assuming the 90 days horizon QBE Insurance Group is expected to generate 0.96 times more return on investment than Chiba Bank. However, QBE Insurance Group is 1.04 times less risky than Chiba Bank. It trades about -0.27 of its potential returns per unit of risk. Chiba Bank is currently generating about -0.38 per unit of risk. If you would invest  1,220  in QBE Insurance Group on October 5, 2024 and sell it today you would lose (70.00) from holding QBE Insurance Group or give up 5.74% of portfolio value over 90 days.

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

QBE Insurance Group  vs.  Chiba Bank

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.

Chiba Bank

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Chiba Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chiba Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with QBE Insurance and Chiba Bank

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

The idea behind QBE Insurance Group and Chiba Bank 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.