Correlation Between Direct Line and KRISPY KREME
Can any of the company-specific risk be diversified away by investing in both Direct Line and KRISPY KREME 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 KRISPY KREME 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 KRISPY KREME DL 01, you can compare the effects of market volatilities on Direct Line and KRISPY KREME 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 KRISPY KREME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and KRISPY KREME.
Diversification Opportunities for Direct Line and KRISPY KREME
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Direct and KRISPY is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and KRISPY KREME DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KRISPY KREME DL 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 KRISPY KREME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KRISPY KREME DL has no effect on the direction of Direct Line i.e., Direct Line and KRISPY KREME go up and down completely randomly.
Pair Corralation between Direct Line and KRISPY KREME
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 1.76 times more return on investment than KRISPY KREME. However, Direct Line is 1.76 times more volatile than KRISPY KREME DL 01. It trades about 0.15 of its potential returns per unit of risk. KRISPY KREME DL 01 is currently generating about -0.06 per unit of risk. If you would invest 215.00 in Direct Line Insurance on October 14, 2024 and sell it today you would earn a total of 90.00 from holding Direct Line Insurance or generate 41.86% 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. KRISPY KREME DL 01
Performance |
| Timeline |
| Direct Line Insurance |
| KRISPY KREME DL |
Direct Line and KRISPY KREME Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and KRISPY KREME
The main advantage of trading using opposite Direct Line and KRISPY KREME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, KRISPY KREME 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 KRISPY KREME will offset losses from the drop in KRISPY KREME's long position.| Direct Line vs. Astral Foods Limited | Direct Line vs. GWILLI FOOD | Direct Line vs. SALESFORCE INC CDR | Direct Line vs. Tradegate AG Wertpapierhandelsbank |
| KRISPY KREME vs. Insurance Australia Group | KRISPY KREME vs. REVO INSURANCE SPA | KRISPY KREME vs. Reinsurance Group of | KRISPY KREME vs. Direct Line Insurance |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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