Correlation Between Direct Line and SLR Investment
Can any of the company-specific risk be diversified away by investing in both Direct Line and SLR Investment 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 SLR Investment 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 SLR Investment Corp, you can compare the effects of market volatilities on Direct Line and SLR Investment 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 SLR Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and SLR Investment.
Diversification Opportunities for Direct Line and SLR Investment
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direct and SLR is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and SLR Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLR Investment Corp 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 SLR Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLR Investment Corp has no effect on the direction of Direct Line i.e., Direct Line and SLR Investment go up and down completely randomly.
Pair Corralation between Direct Line and SLR Investment
Assuming the 90 days trading horizon Direct Line is expected to generate 2.97 times less return on investment than SLR Investment. In addition to that, Direct Line is 1.01 times more volatile than SLR Investment Corp. It trades about 0.11 of its total potential returns per unit of risk. SLR Investment Corp is currently generating about 0.32 per unit of volatility. If you would invest 1,542 in SLR Investment Corp on October 23, 2024 and sell it today you would earn a total of 74.00 from holding SLR Investment Corp or generate 4.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.12% |
| Values | Daily Returns |
Direct Line Insurance vs. SLR Investment Corp
Performance |
| Timeline |
| Direct Line Insurance |
| SLR Investment Corp |
Direct Line and SLR Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and SLR Investment
The main advantage of trading using opposite Direct Line and SLR Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, SLR Investment 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 SLR Investment will offset losses from the drop in SLR Investment's long position.| Direct Line vs. MAGNUM MINING EXP | Direct Line vs. MIRAMAR HOTEL INV | Direct Line vs. Zijin Mining Group | Direct Line vs. HYATT HOTELS A |
| SLR Investment vs. BII Railway Transportation | SLR Investment vs. PLANT VEDA FOODS | SLR Investment vs. Nomad Foods | SLR Investment vs. INDOFOOD AGRI RES |
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 CEOs Directory module to screen CEOs from public companies around the world.
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