Correlation Between QBE Insurance and Daiwa House

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

Diversification Opportunities for QBE Insurance and Daiwa House

0.29

Correlation Coefficient

QBE Insurance  Daiwa House

Modest diversification

The 3 months correlation between QBE and Daiwa is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Daiwa House Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa House Industry 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 Daiwa House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa House Industry has no effect on the direction of QBE Insurance i.e., QBE Insurance and Daiwa House go up and down completely randomly.

Pair Corralation between QBE Insurance and Daiwa House

Assuming the 90 days horizon QBE Insurance Group is expected to generate 1.72 times more return on investment than Daiwa House. However, QBE Insurance is 1.72 times more volatile than Daiwa House Industry. It trades about 0.1 of its potential returns per unit of risk. Daiwa House Industry is currently generating about -0.03 per unit of risk. If you would invest  1,128  in QBE Insurance Group on October 11, 2024 and sell it today you would earn a total of  118.00  from holding QBE Insurance Group or generate 10.46% 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.  Daiwa House Industry

QBE Insurance Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, QBE Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Daiwa House Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiwa House Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Daiwa House is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with QBE Insurance and Daiwa House

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

The idea behind QBE Insurance Group and Daiwa House Industry 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.