Correlation Between Cembra Money and Direct Line
Can any of the company-specific risk be diversified away by investing in both Cembra Money 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 Cembra Money and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cembra Money Bank and Direct Line Insurance, you can compare the effects of market volatilities on Cembra Money 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 Cembra Money with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cembra Money and Direct Line.
Diversification Opportunities for Cembra Money and Direct Line
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cembra and Direct is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cembra Money Bank 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 Cembra Money 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 Cembra Money Bank 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 Cembra Money i.e., Cembra Money and Direct Line go up and down completely randomly.
Pair Corralation between Cembra Money and Direct Line
Assuming the 90 days trading horizon Cembra Money Bank is expected to generate 0.93 times more return on investment than Direct Line. However, Cembra Money Bank is 1.08 times less risky than Direct Line. It trades about 0.6 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.33 per unit of risk. If you would invest 8,155 in Cembra Money Bank on October 25, 2024 and sell it today you would earn a total of 730.00 from holding Cembra Money Bank or generate 8.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cembra Money Bank vs. Direct Line Insurance
Performance |
| Timeline |
| Cembra Money Bank |
| Direct Line Insurance |
Cembra Money and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cembra Money and Direct Line
The main advantage of trading using opposite Cembra Money and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cembra Money 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.| Cembra Money vs. Toyota Motor Corp | Cembra Money vs. SoftBank Group Corp | Cembra Money vs. OTP Bank Nyrt | Cembra Money vs. ONEOK Inc |
| Direct Line vs. Games Workshop Group | Direct Line vs. Auto Trader Group | Direct Line vs. Coor Service Management | Direct Line vs. iShares Dow Jones |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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