Correlation Between QBE Insurance and Cincinnati Financial

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

Diversification Opportunities for QBE Insurance and Cincinnati Financial

0.0

Correlation Coefficient

QBE Insurance  Cincinnati Financial

Pay attention - limited upside

The 3 months correlation between QBE and Cincinnati is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial 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 Cincinnati Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cincinnati Financial has no effect on the direction of QBE Insurance i.e., QBE Insurance and Cincinnati Financial go up and down completely randomly.

Pair Corralation between QBE Insurance and Cincinnati Financial

Assuming the 90 days horizon QBE Insurance Group is expected to generate 1.05 times more return on investment than Cincinnati Financial. However, QBE Insurance is 1.05 times more volatile than Cincinnati Financial. It trades about 0.15 of its potential returns per unit of risk. Cincinnati Financial is currently generating about 0.0 per unit of risk. If you would invest  1,117  in QBE Insurance Group on December 30, 2024 and sell it today you would earn a total of  183.00  from holding QBE Insurance Group or generate 16.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

QBE Insurance Group  vs.  Cincinnati Financial

QBE Insurance Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, QBE Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Cincinnati Financial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with QBE Insurance and Cincinnati Financial

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

The idea behind QBE Insurance Group and Cincinnati Financial 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.