Correlation Between QBE Insurance and TFS FINANCIAL

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

Diversification Opportunities for QBE Insurance and TFS FINANCIAL

0.92

Correlation Coefficient

QBE Insurance  TFS FINANCIAL

Almost no diversification

The 3 months correlation between QBE and TFS is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and TFS FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFS 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 TFS FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFS FINANCIAL has no effect on the direction of QBE Insurance i.e., QBE Insurance and TFS FINANCIAL go up and down completely randomly.

Pair Corralation between QBE Insurance and TFS FINANCIAL

Assuming the 90 days horizon QBE Insurance Group is expected to generate 1.03 times more return on investment than TFS FINANCIAL. However, QBE Insurance is 1.03 times more volatile than TFS FINANCIAL. It trades about -0.13 of its potential returns per unit of risk. TFS FINANCIAL is currently generating about -0.21 per unit of risk. If you would invest  1,200  in QBE Insurance Group on September 22, 2024 and sell it today you would lose (50.00) from holding QBE Insurance Group or give up 4.17% of portfolio value over 90 days.

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

QBE Insurance Group  vs.  TFS FINANCIAL

QBE Insurance Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, QBE Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TFS FINANCIAL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TFS FINANCIAL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TFS FINANCIAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with QBE Insurance and TFS FINANCIAL

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

The idea behind QBE Insurance Group and TFS 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.