Correlation Between Volkswagen and Direct Line
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Direct Line 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 Volkswagen and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Direct Line Insurance, you can compare the effects of market volatilities on Volkswagen and Direct Line 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 Volkswagen with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Direct Line.
Diversification Opportunities for Volkswagen and Direct Line
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Volkswagen and Direct is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line Insurance and Volkswagen 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 Volkswagen AG are associated (or correlated) with Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of Volkswagen i.e., Volkswagen and Direct Line go up and down completely randomly.
Pair Corralation between Volkswagen and Direct Line
Assuming the 90 days trading horizon Volkswagen is expected to generate 7.78 times less return on investment than Direct Line. But when comparing it to its historical volatility, Volkswagen AG is 6.66 times less risky than Direct Line. It trades about 0.23 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 15,830 in Direct Line Insurance on September 15, 2024 and sell it today you would earn a total of 8,850 from holding Direct Line Insurance or generate 55.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. Direct Line Insurance
Performance |
| Timeline |
| Volkswagen AG |
| Direct Line Insurance |
Volkswagen and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Direct Line
The main advantage of trading using opposite Volkswagen and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.| Volkswagen vs. Gaztransport et Technigaz | Volkswagen vs. GreenX Metals | Volkswagen vs. Cornish Metals | Volkswagen vs. Europa Metals |
| Direct Line vs. Walmart | Direct Line vs. BYD Co | Direct Line vs. Volkswagen AG | Direct Line vs. Volkswagen AG Non Vtg |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes |