Correlation Between Direct Line and GrafTech International
Can any of the company-specific risk be diversified away by investing in both Direct Line and GrafTech International 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 GrafTech International 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 GrafTech International, you can compare the effects of market volatilities on Direct Line and GrafTech International 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 GrafTech International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and GrafTech International.
Diversification Opportunities for Direct Line and GrafTech International
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Direct and GrafTech is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and GrafTech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GrafTech International 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 GrafTech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GrafTech International has no effect on the direction of Direct Line i.e., Direct Line and GrafTech International go up and down completely randomly.
Pair Corralation between Direct Line and GrafTech International
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 0.42 times more return on investment than GrafTech International. However, Direct Line Insurance is 2.38 times less risky than GrafTech International. It trades about 0.13 of its potential returns per unit of risk. GrafTech International is currently generating about -0.3 per unit of risk. If you would invest 296.00 in Direct Line Insurance on October 15, 2024 and sell it today you would earn a total of 9.00 from holding Direct Line Insurance or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direct Line Insurance vs. GrafTech International
Performance |
| Timeline |
| Direct Line Insurance |
| GrafTech International |
Direct Line and GrafTech International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and GrafTech International
The main advantage of trading using opposite Direct Line and GrafTech International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, GrafTech International 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 GrafTech International will offset losses from the drop in GrafTech International'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 |
| GrafTech International vs. Direct Line Insurance | GrafTech International vs. Virtus Investment Partners | GrafTech International vs. INSURANCE AUST GRP | GrafTech International vs. VIENNA INSURANCE GR |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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