Correlation Between American Public and QBE Insurance

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

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

Diversification Opportunities for American Public and QBE Insurance

0.95

Correlation Coefficient

American Public  QBE Insurance

Almost no diversification

The 3 months correlation between American and QBE is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education 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 American Public 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 American Public Education 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 American Public i.e., American Public and QBE Insurance go up and down completely randomly.

Pair Corralation between American Public and QBE Insurance

Assuming the 90 days horizon American Public Education is expected to generate 2.31 times more return on investment than QBE Insurance. However, American Public is 2.31 times more volatile than QBE Insurance Group. It trades about 0.21 of its potential returns per unit of risk. QBE Insurance Group is currently generating about 0.2 per unit of risk. If you would invest  1,340  in American Public Education on September 12, 2024 and sell it today you would earn a total of  640.00  from holding American Public Education or generate 47.76% return on investment over 90 days.

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

American Public Education  vs.  QBE Insurance Group

American Public Education

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Public reported solid returns over the last few months and may actually be approaching a breakup point.

QBE Insurance Group

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 15 (%) 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 American Public and QBE Insurance

The main advantage of trading using opposite American Public and QBE Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Public 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 American Public Education 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.