Correlation Between Tokyu Construction and QBE Insurance

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

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

Diversification Opportunities for Tokyu Construction and QBE Insurance

0.11

Correlation Coefficient

Tokyu Construction  QBE Insurance

Average diversification

The 3 months correlation between Tokyu and QBE is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Tokyu Construction Co 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 Tokyu Construction 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 Tokyu Construction Co 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 Tokyu Construction i.e., Tokyu Construction and QBE Insurance go up and down completely randomly.

Pair Corralation between Tokyu Construction and QBE Insurance

Assuming the 90 days horizon Tokyu Construction Co is expected to generate 0.69 times more return on investment than QBE Insurance. However, Tokyu Construction Co is 1.44 times less risky than QBE Insurance. It trades about -0.02 of its potential returns per unit of risk. QBE Insurance Group is currently generating about -0.28 per unit of risk. If you would invest  428.00  in Tokyu Construction Co on October 3, 2024 and sell it today you would lose (2.00) from holding Tokyu Construction Co or give up 0.47% of portfolio value over 90 days.

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

Tokyu Construction Co  vs.  QBE Insurance Group

Tokyu Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

QBE Insurance Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, QBE Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tokyu Construction and QBE Insurance

The main advantage of trading using opposite Tokyu Construction and QBE Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokyu Construction 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 Tokyu Construction Co 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.