Correlation Between SHERWIN and QBE Insurance

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

By analyzing existing cross correlation between SHERWIN WILLIAMS 345 percent and QBE Insurance Group, you can compare the effects of market volatilities on SHERWIN 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 SHERWIN with a short position of QBE Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHERWIN and QBE Insurance.

Diversification Opportunities for SHERWIN and QBE Insurance

-0.55

Correlation Coefficient

SHERWIN  QBE Insurance

Excellent diversification

The 3 months correlation between SHERWIN and QBE is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding SHERWIN WILLIAMS 345 percent 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 SHERWIN 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 SHERWIN WILLIAMS 345 percent 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 SHERWIN i.e., SHERWIN and QBE Insurance go up and down completely randomly.

Pair Corralation between SHERWIN and QBE Insurance

Assuming the 90 days trading horizon SHERWIN is expected to generate 54.13 times less return on investment than QBE Insurance. But when comparing it to its historical volatility, SHERWIN WILLIAMS 345 percent is 9.66 times less risky than QBE Insurance. It trades about 0.01 of its potential returns per unit of risk. QBE Insurance Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  926.00  in QBE Insurance Group on September 12, 2024 and sell it today you would earn a total of  296.00  from holding QBE Insurance Group or generate 31.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	81.18%
Values	Daily Returns

SHERWIN WILLIAMS 345 percent  vs.  QBE Insurance Group

SHERWIN WILLIAMS 345

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHERWIN WILLIAMS 345 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SHERWIN is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 uncertain forward indicators, QBE Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SHERWIN and QBE Insurance

The main advantage of trading using opposite SHERWIN and QBE Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHERWIN 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 SHERWIN WILLIAMS 345 percent 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.