Correlation Between Grupo Carso and Direct Line
Can any of the company-specific risk be diversified away by investing in both Grupo Carso 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 Grupo Carso and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grupo Carso SAB and Direct Line Insurance, you can compare the effects of market volatilities on Grupo Carso 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 Grupo Carso with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Carso and Direct Line.
Diversification Opportunities for Grupo Carso and Direct Line
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Grupo and Direct is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Carso SAB 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 Grupo Carso 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 Grupo Carso SAB 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 Grupo Carso i.e., Grupo Carso and Direct Line go up and down completely randomly.
Pair Corralation between Grupo Carso and Direct Line
Assuming the 90 days horizon Grupo Carso SAB is expected to under-perform the Direct Line. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Carso SAB is 1.04 times less risky than Direct Line. The stock trades about -0.03 of its potential returns per unit of risk. The 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grupo Carso SAB vs. Direct Line Insurance
Performance |
| Timeline |
| Grupo Carso SAB |
| Direct Line Insurance |
Grupo Carso and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grupo Carso and Direct Line
The main advantage of trading using opposite Grupo Carso and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Carso 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.| Grupo Carso vs. Honeywell International | ||
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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