Correlation Between Direct Line and ScanSource
Can any of the company-specific risk be diversified away by investing in both Direct Line and ScanSource 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 ScanSource 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 ScanSource, you can compare the effects of market volatilities on Direct Line and ScanSource 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 ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and ScanSource.
Diversification Opportunities for Direct Line and ScanSource
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Direct and ScanSource is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource 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 ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of Direct Line i.e., Direct Line and ScanSource go up and down completely randomly.
Pair Corralation between Direct Line and ScanSource
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 2.68 times more return on investment than ScanSource. However, Direct Line is 2.68 times more volatile than ScanSource. It trades about 0.28 of its potential returns per unit of risk. ScanSource is currently generating about 0.02 per unit of risk. If you would invest 188.00 in Direct Line Insurance on October 17, 2024 and sell it today you would earn a total of 115.00 from holding Direct Line Insurance or generate 61.17% 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. ScanSource
Performance |
| Timeline |
| Direct Line Insurance |
| ScanSource |
Direct Line and ScanSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and ScanSource
The main advantage of trading using opposite Direct Line and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, ScanSource 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 ScanSource will offset losses from the drop in ScanSource's long position.| Direct Line vs. Superior Plus Corp | Direct Line vs. NMI Holdings | Direct Line vs. SIVERS SEMICONDUCTORS AB | Direct Line vs. Talanx AG |
| ScanSource vs. Nucletron Electronic Aktiengesellschaft | ScanSource vs. Direct Line Insurance | ScanSource vs. Samsung Electronics Co | ScanSource vs. TT Electronics PLC |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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