Correlation Between Direct Line and Apple
Can any of the company-specific risk be diversified away by investing in both Direct Line and Apple 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 Apple 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 Apple Inc, you can compare the effects of market volatilities on Direct Line and Apple 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 Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Apple.
Diversification Opportunities for Direct Line and Apple
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Direct and Apple is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Direct Line i.e., Direct Line and Apple go up and down completely randomly.
Pair Corralation between Direct Line and Apple
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 1.81 times more return on investment than Apple. However, Direct Line is 1.81 times more volatile than Apple Inc. It trades about 0.12 of its potential returns per unit of risk. Apple Inc is currently generating about 0.02 per unit of risk. If you would invest 299.00 in Direct Line Insurance on October 11, 2024 and sell it today you would earn a total of 9.00 from holding Direct Line Insurance or generate 3.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direct Line Insurance vs. Apple Inc
Performance |
| Timeline |
| Direct Line Insurance |
| Apple Inc |
Direct Line and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Apple
The main advantage of trading using opposite Direct Line and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.| Direct Line vs. Sinopec Shanghai Petrochemical | Direct Line vs. X FAB Silicon Foundries | Direct Line vs. SILICON LABORATOR | Direct Line vs. China BlueChemical |
| Apple vs. SINGAPORE AIRLINES | Apple vs. Direct Line Insurance | Apple vs. REVO INSURANCE SPA | Apple vs. Nok Airlines PCL |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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