Correlation Between Employers Holdings and QBE Insurance

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

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

Diversification Opportunities for Employers Holdings and QBE Insurance

0.61

Correlation Coefficient

Employers Holdings  QBE Insurance

Poor diversification

The 3 months correlation between Employers and QBE is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Employers Holdings 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 Employers Holdings 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 Employers Holdings 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 Employers Holdings i.e., Employers Holdings and QBE Insurance go up and down completely randomly.

Pair Corralation between Employers Holdings and QBE Insurance

Considering the 90-day investment horizon Employers Holdings is expected to generate 0.61 times more return on investment than QBE Insurance. However, Employers Holdings is 1.65 times less risky than QBE Insurance. It trades about 0.09 of its potential returns per unit of risk. QBE Insurance Group is currently generating about 0.03 per unit of risk. If you would invest  4,657  in Employers Holdings on September 24, 2024 and sell it today you would earn a total of  411.00  from holding Employers Holdings or generate 8.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Employers Holdings  vs.  QBE Insurance Group

Employers Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Employers Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Employers Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

QBE Insurance Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, QBE Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Employers Holdings and QBE Insurance

The main advantage of trading using opposite Employers Holdings and QBE Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Employers Holdings 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 Employers Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.