Correlation Between Toro and QBE Insurance

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

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

Diversification Opportunities for Toro and QBE Insurance

0.33

Correlation Coefficient

Toro  QBE Insurance

Weak diversification

The 3 months correlation between Toro and QBE is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Toro 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 Toro 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 Toro 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 Toro i.e., Toro and QBE Insurance go up and down completely randomly.

Pair Corralation between Toro and QBE Insurance

Considering the 90-day investment horizon Toro is expected to generate 2.44 times less return on investment than QBE Insurance. But when comparing it to its historical volatility, Toro Co is 2.04 times less risky than QBE Insurance. It trades about 0.05 of its potential returns per unit of risk. QBE Insurance Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,101  in QBE Insurance Group on September 14, 2024 and sell it today you would earn a total of  99.00  from holding QBE Insurance Group or generate 8.99% return on investment over 90 days.

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

Toro Co  vs.  QBE Insurance Group

Toro

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toro Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Toro is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

QBE Insurance Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, QBE Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Toro and QBE Insurance

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

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.