Correlation Between Direct Line and Western Copper
Can any of the company-specific risk be diversified away by investing in both Direct Line and Western Copper 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 Direct Line and Western Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direct Line Insurance and Western Copper and, you can compare the effects of market volatilities on Direct Line and Western Copper 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 Direct Line with a short position of Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Western Copper.
Diversification Opportunities for Direct Line and Western Copper
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Direct and Western is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper and Direct Line 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 Direct Line Insurance are associated (or correlated) with Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Direct Line i.e., Direct Line and Western Copper go up and down completely randomly.
Pair Corralation between Direct Line and Western Copper
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 0.28 times more return on investment than Western Copper. However, Direct Line Insurance is 3.57 times less risky than Western Copper. It trades about 0.15 of its potential returns per unit of risk. Western Copper and is currently generating about -0.13 per unit of risk. If you would invest 310.00 in Direct Line Insurance on November 6, 2024 and sell it today you would earn a total of 7.00 from holding Direct Line Insurance or generate 2.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direct Line Insurance vs. Western Copper and
Performance |
| Timeline |
| Direct Line Insurance |
| Western Copper |
Direct Line and Western Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Western Copper
The main advantage of trading using opposite Direct Line and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Western Copper 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 Western Copper will offset losses from the drop in Western Copper's long position.| Direct Line vs. CARSALESCOM | Direct Line vs. CLOVER HEALTH INV | Direct Line vs. TRADEGATE | Direct Line vs. Sims Metal Management |
| Western Copper vs. ON SEMICONDUCTOR | Western Copper vs. TOREX SEMICONDUCTOR LTD | Western Copper vs. FLOW TRADERS LTD | Western Copper vs. Siamgas And Petrochemicals |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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