Correlation Between Direct Line and DAX Index
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By analyzing existing cross correlation between Direct Line Insurance and DAX Index, you can compare the effects of market volatilities on Direct Line and DAX Index 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 DAX Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and DAX Index.
Diversification Opportunities for Direct Line and DAX Index
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Direct and DAX is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and DAX Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAX Index 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 DAX Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAX Index has no effect on the direction of Direct Line i.e., Direct Line and DAX Index go up and down completely randomly.
Pair Corralation between Direct Line and DAX Index
Assuming the 90 days trading horizon Direct Line is expected to generate 2.08 times less return on investment than DAX Index. In addition to that, Direct Line is 1.48 times more volatile than DAX Index. It trades about 0.19 of its total potential returns per unit of risk. DAX Index is currently generating about 0.58 per unit of volatility. If you would invest 1,984,877 in DAX Index on October 24, 2024 and sell it today you would earn a total of 140,550 from holding DAX Index or generate 7.08% 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. DAX Index
Performance |
| Timeline |
Direct Line and DAX Index Volatility Contrast
Predicted Return Density |
| Returns |
Direct Line Insurance
Pair trading matchups for Direct Line
DAX Index
Pair trading matchups for DAX Index
Pair Trading with Direct Line and DAX Index
The main advantage of trading using opposite Direct Line and DAX Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, DAX Index 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 DAX Index will offset losses from the drop in DAX Index's long position.| Direct Line vs. Allianz SE | Direct Line vs. ALLIANZ SE UNSPADR | Direct Line vs. AXA SA | Direct Line vs. Principal Financial Group |
| DAX Index vs. Retail Estates NV | DAX Index vs. AEON STORES | DAX Index vs. BJs Wholesale Club | DAX Index vs. Nanjing Panda Electronics |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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