Correlation Between Direct Line and MeVis Medical
Can any of the company-specific risk be diversified away by investing in both Direct Line and MeVis Medical 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 MeVis Medical 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 MeVis Medical Solutions, you can compare the effects of market volatilities on Direct Line and MeVis Medical 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 MeVis Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and MeVis Medical.
Diversification Opportunities for Direct Line and MeVis Medical
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Direct and MeVis is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and MeVis Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MeVis Medical Solutions 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 MeVis Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MeVis Medical Solutions has no effect on the direction of Direct Line i.e., Direct Line and MeVis Medical go up and down completely randomly.
Pair Corralation between Direct Line and MeVis Medical
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 2.91 times more return on investment than MeVis Medical. However, Direct Line is 2.91 times more volatile than MeVis Medical Solutions. It trades about 0.03 of its potential returns per unit of risk. MeVis Medical Solutions is currently generating about -0.05 per unit of risk. If you would invest 242.00 in Direct Line Insurance on September 20, 2024 and sell it today you would earn a total of 53.00 from holding Direct Line Insurance or generate 21.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direct Line Insurance vs. MeVis Medical Solutions
Performance |
| Timeline |
| Direct Line Insurance |
| MeVis Medical Solutions |
Direct Line and MeVis Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and MeVis Medical
The main advantage of trading using opposite Direct Line and MeVis Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, MeVis Medical 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 MeVis Medical will offset losses from the drop in MeVis Medical'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 |
| MeVis Medical vs. The Boston Beer | MeVis Medical vs. PARKEN Sport Entertainment | MeVis Medical vs. United Breweries Co | MeVis Medical vs. Seven West Media |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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