Correlation Between Direct Line and Ping An
Can any of the company-specific risk be diversified away by investing in both Direct Line and Ping An 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 Ping An 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 Ping An Insurance, you can compare the effects of market volatilities on Direct Line and Ping An 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 Ping An. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Ping An.
Diversification Opportunities for Direct Line and Ping An
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Direct and Ping is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Ping An Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ping An Insurance 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 Ping An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ping An Insurance has no effect on the direction of Direct Line i.e., Direct Line and Ping An go up and down completely randomly.
Pair Corralation between Direct Line and Ping An
Assuming the 90 days trading horizon Direct Line is expected to generate 1.32 times less return on investment than Ping An. In addition to that, Direct Line is 1.02 times more volatile than Ping An Insurance. It trades about 0.1 of its total potential returns per unit of risk. Ping An Insurance is currently generating about 0.14 per unit of volatility. If you would invest 403.00 in Ping An Insurance on September 4, 2024 and sell it today you would earn a total of 141.00 from holding Ping An Insurance or generate 34.99% 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. Ping An Insurance
Performance |
| Timeline |
| Direct Line Insurance |
| Ping An Insurance |
Direct Line and Ping An Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Ping An
The main advantage of trading using opposite Direct Line and Ping An positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Ping An 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 Ping An will offset losses from the drop in Ping An's long position.| Direct Line vs. Allianz SE | Direct Line vs. Superior Plus Corp | Direct Line vs. NMI Holdings | Direct Line vs. Origin Agritech |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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