Correlation Between QBE Insurance and Texas Roadhouse

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

Diversification Opportunities for QBE Insurance and Texas Roadhouse

0.89

Correlation Coefficient

QBE Insurance  Texas Roadhouse

Very poor diversification

The 3 months correlation between QBE and Texas is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse 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 Texas Roadhouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Roadhouse has no effect on the direction of QBE Insurance i.e., QBE Insurance and Texas Roadhouse go up and down completely randomly.

Pair Corralation between QBE Insurance and Texas Roadhouse

Assuming the 90 days horizon QBE Insurance Group is expected to under-perform the Texas Roadhouse. But the stock apears to be less risky and, when comparing its historical volatility, QBE Insurance Group is 1.33 times less risky than Texas Roadhouse. The stock trades about -0.22 of its potential returns per unit of risk. The Texas Roadhouse is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  18,230  in Texas Roadhouse on September 23, 2024 and sell it today you would lose (770.00) from holding Texas Roadhouse or give up 4.22% of portfolio value over 90 days.

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

QBE Insurance Group  vs.  Texas Roadhouse

QBE Insurance Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 9 (%) 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.

Texas Roadhouse

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Texas Roadhouse reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with QBE Insurance and Texas Roadhouse

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

The idea behind QBE Insurance Group and Texas Roadhouse 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.