Correlation Between Direct Line and KINGDEE INTL
Can any of the company-specific risk be diversified away by investing in both Direct Line and KINGDEE INTL 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 KINGDEE INTL 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 KINGDEE INTL SOFTWA, you can compare the effects of market volatilities on Direct Line and KINGDEE INTL 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 KINGDEE INTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and KINGDEE INTL.
Diversification Opportunities for Direct Line and KINGDEE INTL
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Direct and KINGDEE is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and KINGDEE INTL SOFTWA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINGDEE INTL SOFTWA 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 KINGDEE INTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINGDEE INTL SOFTWA has no effect on the direction of Direct Line i.e., Direct Line and KINGDEE INTL go up and down completely randomly.
Pair Corralation between Direct Line and KINGDEE INTL
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 1.36 times more return on investment than KINGDEE INTL. However, Direct Line is 1.36 times more volatile than KINGDEE INTL SOFTWA. It trades about 0.34 of its potential returns per unit of risk. KINGDEE INTL SOFTWA is currently generating about 0.18 per unit of risk. If you would invest 195.00 in Direct Line Insurance on September 12, 2024 and sell it today you would earn a total of 107.00 from holding Direct Line Insurance or generate 54.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Direct Line Insurance vs. KINGDEE INTL SOFTWA
Performance |
| Timeline |
| Direct Line Insurance |
| KINGDEE INTL SOFTWA |
Direct Line and KINGDEE INTL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and KINGDEE INTL
The main advantage of trading using opposite Direct Line and KINGDEE INTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, KINGDEE INTL 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 KINGDEE INTL will offset losses from the drop in KINGDEE INTL's long position.| Direct Line vs. Superior Plus Corp | Direct Line vs. SIVERS SEMICONDUCTORS AB | Direct Line vs. CHINA HUARONG ENERHD 50 | Direct Line vs. NORDIC HALIBUT AS |
| KINGDEE INTL vs. SIMS METAL MGT | KINGDEE INTL vs. LION ONE METALS | KINGDEE INTL vs. Japan Post Insurance | KINGDEE INTL 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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