Correlation Between Direct Line and Blackstone
Can any of the company-specific risk be diversified away by investing in both Direct Line and Blackstone 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 Blackstone 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 Blackstone Group, you can compare the effects of market volatilities on Direct Line and Blackstone 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 Blackstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Blackstone.
Diversification Opportunities for Direct Line and Blackstone
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Direct and Blackstone is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Blackstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackstone Group 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 Blackstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackstone Group has no effect on the direction of Direct Line i.e., Direct Line and Blackstone go up and down completely randomly.
Pair Corralation between Direct Line and Blackstone
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 2.44 times more return on investment than Blackstone. However, Direct Line is 2.44 times more volatile than Blackstone Group. It trades about 0.29 of its potential returns per unit of risk. Blackstone Group is currently generating about -0.06 per unit of risk. If you would invest 189.00 in Direct Line Insurance on October 26, 2024 and sell it today you would earn a total of 126.00 from holding Direct Line Insurance or generate 66.67% 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. Blackstone Group
Performance |
| Timeline |
| Direct Line Insurance |
| Blackstone Group |
Direct Line and Blackstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Blackstone
The main advantage of trading using opposite Direct Line and Blackstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Blackstone 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 Blackstone will offset losses from the drop in Blackstone's long position.| Direct Line vs. REINET INVESTMENTS SCA | Direct Line vs. PENN NATL GAMING | Direct Line vs. URBAN OUTFITTERS | Direct Line vs. MOVIE GAMES SA |
| Blackstone vs. Synchrony Financial | Blackstone vs. RYU Apparel | Blackstone vs. Ameriprise Financial | Blackstone 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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