Correlation Between AEGEAN AIRLINES and Direct Line
Can any of the company-specific risk be diversified away by investing in both AEGEAN AIRLINES 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 AEGEAN AIRLINES and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AEGEAN AIRLINES and Direct Line Insurance, you can compare the effects of market volatilities on AEGEAN AIRLINES 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 AEGEAN AIRLINES with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of AEGEAN AIRLINES and Direct Line.
Diversification Opportunities for AEGEAN AIRLINES and Direct Line
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AEGEAN and Direct is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding AEGEAN AIRLINES 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 AEGEAN AIRLINES 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 AEGEAN AIRLINES 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 AEGEAN AIRLINES i.e., AEGEAN AIRLINES and Direct Line go up and down completely randomly.
Pair Corralation between AEGEAN AIRLINES and Direct Line
Assuming the 90 days trading horizon AEGEAN AIRLINES is expected to generate 8.54 times less return on investment than Direct Line. But when comparing it to its historical volatility, AEGEAN AIRLINES is 1.59 times less risky than Direct Line. It trades about 0.01 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 194.00 in Direct Line Insurance on December 13, 2024 and sell it today you would earn a total of 134.00 from holding Direct Line Insurance or generate 69.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AEGEAN AIRLINES vs. Direct Line Insurance
Performance |
| Timeline |
| AEGEAN AIRLINES |
| Direct Line Insurance |
AEGEAN AIRLINES and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AEGEAN AIRLINES and Direct Line
The main advantage of trading using opposite AEGEAN AIRLINES and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AEGEAN AIRLINES 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.| AEGEAN AIRLINES vs. Goodyear Tire Rubber | ||
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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