Correlation Between QBE Insurance and AmTrust Financial

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

Diversification Opportunities for QBE Insurance and AmTrust Financial

-0.13

Correlation Coefficient

QBE Insurance  AmTrust Financial

Good diversification

The 3 months correlation between QBE and AmTrust is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding QBE Insurance Group and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial 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 AmTrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmTrust Financial has no effect on the direction of QBE Insurance i.e., QBE Insurance and AmTrust Financial go up and down completely randomly.

Pair Corralation between QBE Insurance and AmTrust Financial

Assuming the 90 days horizon QBE Insurance Group is expected to generate 1.32 times more return on investment than AmTrust Financial. However, QBE Insurance is 1.32 times more volatile than AmTrust Financial Services. It trades about 0.07 of its potential returns per unit of risk. AmTrust Financial Services is currently generating about -0.01 per unit of risk. If you would invest  1,080  in QBE Insurance Group on September 29, 2024 and sell it today you would earn a total of  110.00  from holding QBE Insurance Group or generate 10.19% return on investment over 90 days.

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

QBE Insurance Group  vs.  AmTrust Financial Services

QBE Insurance Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, QBE Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AmTrust Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AmTrust Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, AmTrust Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with QBE Insurance and AmTrust Financial

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

The idea behind QBE Insurance Group and AmTrust Financial Services 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.