Correlation Between QBE Insurance and Heritage Insurance

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

Diversification Opportunities for QBE Insurance and Heritage Insurance

-0.07

Correlation Coefficient

QBE Insurance  Heritage Insurance

Good diversification

The 3 months correlation between QBE and Heritage is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Heritage Insurance Hldgs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Insurance Hldgs 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 Heritage Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Insurance Hldgs has no effect on the direction of QBE Insurance i.e., QBE Insurance and Heritage Insurance go up and down completely randomly.

Pair Corralation between QBE Insurance and Heritage Insurance

Assuming the 90 days horizon QBE Insurance is expected to generate 1.93 times less return on investment than Heritage Insurance. But when comparing it to its historical volatility, QBE Insurance Group is 2.34 times less risky than Heritage Insurance. It trades about 0.14 of its potential returns per unit of risk. Heritage Insurance Hldgs is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,152  in Heritage Insurance Hldgs on December 19, 2024 and sell it today you would earn a total of  236.00  from holding Heritage Insurance Hldgs or generate 20.49% return on investment over 90 days.

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

QBE Insurance Group  vs.  Heritage Insurance Hldgs

QBE Insurance Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 11 (%) 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 April 2025.

Heritage Insurance Hldgs

Risk-Adjusted Performance

OK

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

Pair Trading with QBE Insurance and Heritage Insurance

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

The idea behind QBE Insurance Group and Heritage Insurance Hldgs 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.