Correlation Between QBE Insurance and Collins Foods

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

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

Diversification Opportunities for QBE Insurance and Collins Foods

0.52

Correlation Coefficient

QBE Insurance  Collins Foods

Very weak diversification

The 3 months correlation between QBE and Collins is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and Collins Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods Limited and QBE Insurance 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 QBE Insurance Group are associated (or correlated) with Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods Limited has no effect on the direction of QBE Insurance i.e., QBE Insurance and Collins Foods go up and down completely randomly.

Pair Corralation between QBE Insurance and Collins Foods

Assuming the 90 days horizon QBE Insurance Group is expected to generate 0.76 times more return on investment than Collins Foods. However, QBE Insurance Group is 1.31 times less risky than Collins Foods. It trades about 0.07 of its potential returns per unit of risk. Collins Foods Limited is currently generating about 0.02 per unit of risk. If you would invest  740.00  in QBE Insurance Group on September 4, 2024 and sell it today you would earn a total of  480.00  from holding QBE Insurance Group or generate 64.86% return on investment over 90 days.

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

QBE Insurance Group  vs.  Collins Foods Limited

QBE Insurance Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 20 (%) 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.

Collins Foods Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Collins Foods Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Collins Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with QBE Insurance and Collins Foods

The main advantage of trading using opposite QBE Insurance and Collins Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if QBE Insurance position performs unexpectedly, Collins Foods 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 Collins Foods will offset losses from the drop in Collins Foods' long position.

The idea behind QBE Insurance Group and Collins Foods Limited 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.