Correlation Between QBE Insurance and PROCTER

Can any of the company-specific risk be diversified away by investing in both QBE Insurance and PROCTER 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 PROCTER 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 PROCTER GAMBLE 555, you can compare the effects of market volatilities on QBE Insurance and PROCTER 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 PROCTER. Check out your portfolio center. Please also check ongoing floating volatility patterns of QBE Insurance and PROCTER.

Diversification Opportunities for QBE Insurance and PROCTER

0.08

Correlation Coefficient

QBE Insurance  PROCTER

Significant diversification

The 3 months correlation between QBE and PROCTER is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and PROCTER GAMBLE 555 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PROCTER GAMBLE 555 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 PROCTER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PROCTER GAMBLE 555 has no effect on the direction of QBE Insurance i.e., QBE Insurance and PROCTER go up and down completely randomly.

Pair Corralation between QBE Insurance and PROCTER

Assuming the 90 days horizon QBE Insurance Group is expected to generate 3.23 times more return on investment than PROCTER. However, QBE Insurance is 3.23 times more volatile than PROCTER GAMBLE 555. It trades about 0.11 of its potential returns per unit of risk. PROCTER GAMBLE 555 is currently generating about 0.01 per unit of risk. If you would invest  1,165  in QBE Insurance Group on November 29, 2024 and sell it today you would earn a total of  225.00  from holding QBE Insurance Group or generate 19.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	84.75%
Values	Daily Returns

QBE Insurance Group  vs.  PROCTER GAMBLE 555

QBE Insurance Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, QBE Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

PROCTER GAMBLE 555

Risk-Adjusted Performance

Very Weak

Over the last 90 days PROCTER GAMBLE 555 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PROCTER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with QBE Insurance and PROCTER

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

The idea behind QBE Insurance Group and PROCTER GAMBLE 555 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.