Correlation Between Direct Line and SERI INDUSTRIAL
Can any of the company-specific risk be diversified away by investing in both Direct Line and SERI INDUSTRIAL 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 SERI INDUSTRIAL 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 SERI INDUSTRIAL EO, you can compare the effects of market volatilities on Direct Line and SERI INDUSTRIAL 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 SERI INDUSTRIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and SERI INDUSTRIAL.
Diversification Opportunities for Direct Line and SERI INDUSTRIAL
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Direct and SERI is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and SERI INDUSTRIAL EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SERI INDUSTRIAL EO 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 SERI INDUSTRIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SERI INDUSTRIAL EO has no effect on the direction of Direct Line i.e., Direct Line and SERI INDUSTRIAL go up and down completely randomly.
Pair Corralation between Direct Line and SERI INDUSTRIAL
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 1.12 times more return on investment than SERI INDUSTRIAL. However, Direct Line is 1.12 times more volatile than SERI INDUSTRIAL EO. It trades about 0.26 of its potential returns per unit of risk. SERI INDUSTRIAL EO is currently generating about -0.07 per unit of risk. If you would invest 195.00 in Direct Line Insurance on October 11, 2024 and sell it today you would earn a total of 113.00 from holding Direct Line Insurance or generate 57.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.44% |
| Values | Daily Returns |
Direct Line Insurance vs. SERI INDUSTRIAL EO
Performance |
| Timeline |
| Direct Line Insurance |
| SERI INDUSTRIAL EO |
Direct Line and SERI INDUSTRIAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and SERI INDUSTRIAL
The main advantage of trading using opposite Direct Line and SERI INDUSTRIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, SERI INDUSTRIAL 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 SERI INDUSTRIAL will offset losses from the drop in SERI INDUSTRIAL's long position.| Direct Line vs. Sinopec Shanghai Petrochemical | Direct Line vs. X FAB Silicon Foundries | Direct Line vs. SILICON LABORATOR | Direct Line vs. China BlueChemical |
| SERI INDUSTRIAL vs. TOREX SEMICONDUCTOR LTD | SERI INDUSTRIAL vs. Fast Retailing Co | SERI INDUSTRIAL vs. Tradeweb Markets | SERI INDUSTRIAL vs. FAST RETAIL ADR |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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