Correlation Between Reinsurance Group and QBE Insurance

Can any of the company-specific risk be diversified away by investing in both Reinsurance Group and QBE 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 Reinsurance Group and QBE Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Reinsurance Group of and QBE Insurance Group, you can compare the effects of market volatilities on Reinsurance Group and QBE 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 Reinsurance Group with a short position of QBE Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reinsurance Group and QBE Insurance.

Diversification Opportunities for Reinsurance Group and QBE Insurance

0.82

Correlation Coefficient

Reinsurance Group  QBE Insurance

Very poor diversification

The 3 months correlation between Reinsurance and QBE is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and QBE Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QBE Insurance Group and Reinsurance Group 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 Reinsurance Group of are associated (or correlated) with QBE Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QBE Insurance Group has no effect on the direction of Reinsurance Group i.e., Reinsurance Group and QBE Insurance go up and down completely randomly.

Pair Corralation between Reinsurance Group and QBE Insurance

Assuming the 90 days trading horizon Reinsurance Group of is expected to generate 1.1 times more return on investment than QBE Insurance. However, Reinsurance Group is 1.1 times more volatile than QBE Insurance Group. It trades about 0.06 of its potential returns per unit of risk. QBE Insurance Group is currently generating about 0.07 per unit of risk. If you would invest  12,831  in Reinsurance Group of on October 5, 2024 and sell it today you would earn a total of  7,369  from holding Reinsurance Group of or generate 57.43% return on investment over 90 days.

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

Reinsurance Group of  vs.  QBE Insurance Group

Reinsurance Group

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Reinsurance Group of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Reinsurance Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

QBE Insurance Group

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days QBE Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, QBE Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reinsurance Group and QBE Insurance

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

The idea behind Reinsurance Group of and QBE Insurance Group 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..