Correlation Between Direct Line and Nib Holdings
Can any of the company-specific risk be diversified away by investing in both Direct Line and Nib Holdings 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 Nib Holdings 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 nib holdings limited, you can compare the effects of market volatilities on Direct Line and Nib Holdings 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 Nib Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Nib Holdings.
Diversification Opportunities for Direct Line and Nib Holdings
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Direct and Nib is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and nib holdings limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nib holdings limited 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 Nib Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of nib holdings limited has no effect on the direction of Direct Line i.e., Direct Line and Nib Holdings go up and down completely randomly.
Pair Corralation between Direct Line and Nib Holdings
Assuming the 90 days trading horizon Direct Line is expected to generate 1.73 times less return on investment than Nib Holdings. But when comparing it to its historical volatility, Direct Line Insurance is 2.14 times less risky than Nib Holdings. It trades about 0.18 of its potential returns per unit of risk. nib holdings limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 322.00 in nib holdings limited on November 3, 2024 and sell it today you would earn a total of 16.00 from holding nib holdings limited or generate 4.97% 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. nib holdings limited
Performance |
| Timeline |
| Direct Line Insurance |
| nib holdings limited |
Direct Line and Nib Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Nib Holdings
The main advantage of trading using opposite Direct Line and Nib Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Nib Holdings 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 Nib Holdings will offset losses from the drop in Nib Holdings' long position.| Direct Line vs. NTG Nordic Transport | Direct Line vs. Fukuyama Transporting Co | Direct Line vs. Columbia Sportswear | Direct Line vs. SINGAPORE AIRLINES |
| Nib Holdings vs. Osisko Metals | Nib Holdings vs. Japan Medical Dynamic | Nib Holdings vs. Advanced Medical Solutions | Nib Holdings vs. Inspire Medical Systems |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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