Correlation Between QBE Insurance and Hanover Insurance

Can any of the company-specific risk be diversified away by investing in both QBE Insurance and Hanover 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 QBE Insurance and Hanover Insurance 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 The Hanover Insurance, you can compare the effects of market volatilities on QBE Insurance and Hanover 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 QBE Insurance with a short position of Hanover Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of QBE Insurance and Hanover Insurance.

Diversification Opportunities for QBE Insurance and Hanover Insurance

0.97

Correlation Coefficient

QBE Insurance  Hanover Insurance

Almost no diversification

The 3 months correlation between QBE and Hanover is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance 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 Hanover Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Insurance has no effect on the direction of QBE Insurance i.e., QBE Insurance and Hanover Insurance go up and down completely randomly.

Pair Corralation between QBE Insurance and Hanover Insurance

Assuming the 90 days horizon QBE Insurance Group is expected to under-perform the Hanover Insurance. In addition to that, QBE Insurance is 1.07 times more volatile than The Hanover Insurance. It trades about -0.22 of its total potential returns per unit of risk. The Hanover Insurance is currently generating about -0.14 per unit of volatility. If you would invest  15,206  in The Hanover Insurance on September 23, 2024 and sell it today you would lose (606.00) from holding The Hanover Insurance or give up 3.99% of portfolio value over 90 days.

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

QBE Insurance Group  vs.  The Hanover Insurance

QBE Insurance Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, QBE Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hanover Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hanover Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with QBE Insurance and Hanover Insurance

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

The idea behind QBE Insurance Group and The Hanover Insurance 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.