Correlation Between QBE Insurance and STMICROELECTRONICS

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

Diversification Opportunities for QBE Insurance and STMICROELECTRONICS

-0.73

Correlation Coefficient

QBE Insurance  STMICROELECTRONICS

Pay attention - limited upside

The 3 months correlation between QBE and STMICROELECTRONICS is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS 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 STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of QBE Insurance i.e., QBE Insurance and STMICROELECTRONICS go up and down completely randomly.

Pair Corralation between QBE Insurance and STMICROELECTRONICS

Assuming the 90 days horizon QBE Insurance Group is expected to generate 0.69 times more return on investment than STMICROELECTRONICS. However, QBE Insurance Group is 1.44 times less risky than STMICROELECTRONICS. It trades about 0.27 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.05 per unit of risk. If you would invest  965.00  in QBE Insurance Group on September 5, 2024 and sell it today you would earn a total of  255.00  from holding QBE Insurance Group or generate 26.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

QBE Insurance Group  vs.  STMICROELECTRONICS

QBE Insurance Group

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, QBE Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

STMICROELECTRONICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMICROELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with QBE Insurance and STMICROELECTRONICS

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

The idea behind QBE Insurance Group and STMICROELECTRONICS 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.