Correlation Between Direct Line and Transport International
Can any of the company-specific risk be diversified away by investing in both Direct Line and Transport 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 Transport 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 Transport International Holdings, you can compare the effects of market volatilities on Direct Line and Transport 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 Transport International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Transport International.
Diversification Opportunities for Direct Line and Transport International
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direct and Transport is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Transport International Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport 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 Transport International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport International has no effect on the direction of Direct Line i.e., Direct Line and Transport International go up and down completely randomly.
Pair Corralation between Direct Line and Transport International
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 0.97 times more return on investment than Transport International. However, Direct Line Insurance is 1.04 times less risky than Transport International. It trades about 0.27 of its potential returns per unit of risk. Transport International Holdings is currently generating about -0.2 per unit of risk. If you would invest 305.00 in Direct Line Insurance on October 30, 2024 and sell it today you would earn a total of 12.00 from holding Direct Line Insurance or generate 3.93% 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. Transport International Holdin
Performance |
| Timeline |
| Direct Line Insurance |
| Transport International |
Direct Line and Transport International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Transport International
The main advantage of trading using opposite Direct Line and Transport International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Transport 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 Transport International will offset losses from the drop in Transport International's long position.| Direct Line vs. PARKEN Sport Entertainment | Direct Line vs. ZINC MEDIA GR | Direct Line vs. Suntory Beverage Food | Direct Line vs. Flutter Entertainment PLC |
| Transport International vs. The Yokohama Rubber | Transport International vs. Iridium Communications | Transport International vs. SANOK RUBBER ZY | Transport International vs. Rayonier Advanced Materials |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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