Correlation Between Direct Line and Oji Holdings
Can any of the company-specific risk be diversified away by investing in both Direct Line and Oji Holdings 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 Oji Holdings 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 Oji Holdings, you can compare the effects of market volatilities on Direct Line and Oji Holdings 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 Oji Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Oji Holdings.
Diversification Opportunities for Direct Line and Oji Holdings
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Direct and Oji is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Oji Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oji Holdings 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 Oji Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oji Holdings has no effect on the direction of Direct Line i.e., Direct Line and Oji Holdings go up and down completely randomly.
Pair Corralation between Direct Line and Oji Holdings
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 2.32 times more return on investment than Oji Holdings. However, Direct Line is 2.32 times more volatile than Oji Holdings. It trades about 0.05 of its potential returns per unit of risk. Oji Holdings is currently generating about 0.01 per unit of risk. If you would invest 218.00 in Direct Line Insurance on September 2, 2024 and sell it today you would earn a total of 62.00 from holding Direct Line Insurance or generate 28.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direct Line Insurance vs. Oji Holdings
Performance |
| Timeline |
| Direct Line Insurance |
| Oji Holdings |
Direct Line and Oji Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Oji Holdings
The main advantage of trading using opposite Direct Line and Oji Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Oji Holdings 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 Oji Holdings will offset losses from the drop in Oji Holdings' long position.| Direct Line vs. Enter Air SA | Direct Line vs. PLAYSTUDIOS A DL 0001 | Direct Line vs. Insteel Industries | Direct Line vs. Mitsui Chemicals |
| Oji Holdings vs. Transport International Holdings | Oji Holdings vs. USWE SPORTS AB | Oji Holdings vs. SPORT LISBOA E | Oji Holdings 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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