Correlation Between QBE Insurance and Aegon NV

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

Diversification Opportunities for QBE Insurance and Aegon NV

0.37

Correlation Coefficient

QBE Insurance  Aegon NV

Weak diversification

The 3 months correlation between QBE and Aegon is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Aegon NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon NV ADR 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 Aegon NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon NV ADR has no effect on the direction of QBE Insurance i.e., QBE Insurance and Aegon NV go up and down completely randomly.

Pair Corralation between QBE Insurance and Aegon NV

Assuming the 90 days horizon QBE Insurance Group is expected to generate 1.66 times more return on investment than Aegon NV. However, QBE Insurance is 1.66 times more volatile than Aegon NV ADR. It trades about 0.08 of its potential returns per unit of risk. Aegon NV ADR is currently generating about 0.13 per unit of risk. If you would invest  1,048  in QBE Insurance Group on September 2, 2024 and sell it today you would earn a total of  117.00  from holding QBE Insurance Group or generate 11.16% return on investment over 90 days.

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

QBE Insurance Group  vs.  Aegon NV ADR

QBE Insurance Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, QBE Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aegon NV ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aegon NV ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Aegon NV may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with QBE Insurance and Aegon NV

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

The idea behind QBE Insurance Group and Aegon NV ADR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.