Correlation Between Direct Line and Astral Foods
Can any of the company-specific risk be diversified away by investing in both Direct Line and Astral Foods 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 Astral Foods 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 Astral Foods Limited, you can compare the effects of market volatilities on Direct Line and Astral Foods 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 Astral Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Astral Foods.
Diversification Opportunities for Direct Line and Astral Foods
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Direct and Astral is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Astral Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astral Foods 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 Astral Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astral Foods Limited has no effect on the direction of Direct Line i.e., Direct Line and Astral Foods go up and down completely randomly.
Pair Corralation between Direct Line and Astral Foods
Assuming the 90 days trading horizon Direct Line is expected to generate 1.78 times less return on investment than Astral Foods. In addition to that, Direct Line is 1.64 times more volatile than Astral Foods Limited. It trades about 0.04 of its total potential returns per unit of risk. Astral Foods Limited is currently generating about 0.12 per unit of volatility. If you would invest 705.00 in Astral Foods Limited on August 31, 2024 and sell it today you would earn a total of 245.00 from holding Astral Foods Limited or generate 34.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direct Line Insurance vs. Astral Foods Limited
Performance |
| Timeline |
| Direct Line Insurance |
| Astral Foods Limited |
Direct Line and Astral Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Astral Foods
The main advantage of trading using opposite Direct Line and Astral Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Astral Foods 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 Astral Foods will offset losses from the drop in Astral Foods' long position.| Direct Line vs. NN Group NV | Direct Line vs. Superior Plus Corp | Direct Line vs. Origin Agritech | Direct Line vs. Identiv |
| Astral Foods vs. SalMar ASA | Astral Foods vs. Superior Plus Corp | Astral Foods vs. NMI Holdings | Astral Foods vs. Origin Agritech |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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