Correlation Between SHIP HEALTHCARE and Direct Line
Can any of the company-specific risk be diversified away by investing in both SHIP HEALTHCARE 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 SHIP HEALTHCARE and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SHIP HEALTHCARE HLDGINC and Direct Line Insurance, you can compare the effects of market volatilities on SHIP HEALTHCARE 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 SHIP HEALTHCARE with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIP HEALTHCARE and Direct Line.
Diversification Opportunities for SHIP HEALTHCARE and Direct Line
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SHIP and Direct is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding SHIP HEALTHCARE HLDGINC 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 SHIP HEALTHCARE 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 SHIP HEALTHCARE HLDGINC 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 SHIP HEALTHCARE i.e., SHIP HEALTHCARE and Direct Line go up and down completely randomly.
Pair Corralation between SHIP HEALTHCARE and Direct Line
Assuming the 90 days horizon SHIP HEALTHCARE HLDGINC is expected to under-perform the Direct Line. But the stock apears to be less risky and, when comparing its historical volatility, SHIP HEALTHCARE HLDGINC is 3.42 times less risky than Direct Line. The stock trades about -0.06 of its potential returns per unit of risk. The Direct Line Insurance is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 205.00 in Direct Line Insurance on September 1, 2024 and sell it today you would earn a total of 75.00 from holding Direct Line Insurance or generate 36.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SHIP HEALTHCARE HLDGINC vs. Direct Line Insurance
Performance |
| Timeline |
| SHIP HEALTHCARE HLDGINC |
| Direct Line Insurance |
SHIP HEALTHCARE and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SHIP HEALTHCARE and Direct Line
The main advantage of trading using opposite SHIP HEALTHCARE and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHIP HEALTHCARE 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.| SHIP HEALTHCARE vs. EVS Broadcast Equipment | SHIP HEALTHCARE vs. PARKEN Sport Entertainment | SHIP HEALTHCARE vs. PT Global Mediacom | SHIP HEALTHCARE vs. NTG Nordic Transport |
| Direct Line vs. NN Group NV | Direct Line vs. Superior Plus Corp | Direct Line vs. Origin Agritech | Direct Line vs. Identiv |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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