Correlation Between Direct Line and Keyence
Can any of the company-specific risk be diversified away by investing in both Direct Line and Keyence 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 Keyence 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 Keyence, you can compare the effects of market volatilities on Direct Line and Keyence 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 Keyence. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Keyence.
Diversification Opportunities for Direct Line and Keyence
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Direct and Keyence is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Keyence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyence 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 Keyence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keyence has no effect on the direction of Direct Line i.e., Direct Line and Keyence go up and down completely randomly.
Pair Corralation between Direct Line and Keyence
Assuming the 90 days trading horizon Direct Line is expected to generate 2.61 times less return on investment than Keyence. But when comparing it to its historical volatility, Direct Line Insurance is 1.79 times less risky than Keyence. It trades about 0.06 of its potential returns per unit of risk. Keyence is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 16,317 in Keyence on September 14, 2024 and sell it today you would earn a total of 24,383 from holding Keyence or generate 149.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direct Line Insurance vs. Keyence
Performance |
| Timeline |
| Direct Line Insurance |
| Keyence |
Direct Line and Keyence Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Keyence
The main advantage of trading using opposite Direct Line and Keyence positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Keyence 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 Keyence will offset losses from the drop in Keyence'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 |
| Keyence vs. Aedas Homes SA | Keyence vs. bet at home AG | Keyence vs. United Airlines Holdings | Keyence vs. Focus Home Interactive |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Transaction History View history of all your transactions and understand their impact on performance |