Correlation Between JAPAN EX and QBE Insurance

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

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

Diversification Opportunities for JAPAN EX and QBE Insurance

0.04

Correlation Coefficient

JAPAN EX  QBE Insurance

Significant diversification

The 3 months correlation between JAPAN and QBE is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN EX UNADR 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 JAPAN EX 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 JAPAN EX UNADR 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 JAPAN EX i.e., JAPAN EX and QBE Insurance go up and down completely randomly.

Pair Corralation between JAPAN EX and QBE Insurance

Assuming the 90 days trading horizon JAPAN EX UNADR is expected to generate 1.51 times more return on investment than QBE Insurance. However, JAPAN EX is 1.51 times more volatile than QBE Insurance Group. It trades about -0.04 of its potential returns per unit of risk. QBE Insurance Group is currently generating about -0.19 per unit of risk. If you would invest  1,070  in JAPAN EX UNADR on September 28, 2024 and sell it today you would lose (20.00) from holding JAPAN EX UNADR or give up 1.87% of portfolio value over 90 days.

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

JAPAN EX UNADR  vs.  QBE Insurance Group

JAPAN EX UNADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JAPAN EX UNADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, JAPAN EX 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

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 11 (%) 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 JAPAN EX and QBE Insurance

The main advantage of trading using opposite JAPAN EX and QBE Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN EX 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 JAPAN EX UNADR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.