Correlation Between Direct Line and Evolution Gaming
Can any of the company-specific risk be diversified away by investing in both Direct Line and Evolution Gaming 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 Evolution Gaming 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 Evolution Gaming Group, you can compare the effects of market volatilities on Direct Line and Evolution Gaming 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 Evolution Gaming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Evolution Gaming.
Diversification Opportunities for Direct Line and Evolution Gaming
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Direct and Evolution is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Evolution Gaming Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Gaming 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 Evolution Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Gaming has no effect on the direction of Direct Line i.e., Direct Line and Evolution Gaming go up and down completely randomly.
Pair Corralation between Direct Line and Evolution Gaming
Assuming the 90 days horizon Direct Line Insurance is expected to generate 1.52 times more return on investment than Evolution Gaming. However, Direct Line is 1.52 times more volatile than Evolution Gaming Group. It trades about 0.06 of its potential returns per unit of risk. Evolution Gaming Group is currently generating about -0.03 per unit of risk. If you would invest 787.00 in Direct Line Insurance on September 12, 2024 and sell it today you would earn a total of 466.00 from holding Direct Line Insurance or generate 59.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 92.61% |
| Values | Daily Returns |
Direct Line Insurance vs. Evolution Gaming Group
Performance |
| Timeline |
| Direct Line Insurance |
| Evolution Gaming |
Direct Line and Evolution Gaming Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Evolution Gaming
The main advantage of trading using opposite Direct Line and Evolution Gaming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Evolution Gaming 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 Evolution Gaming will offset losses from the drop in Evolution Gaming's long position.| Direct Line vs. Berkshire Hathaway | Direct Line vs. Berkshire Hathaway | Direct Line vs. Zurich Insurance Group | Direct Line vs. Zurich Insurance Group |
| Evolution Gaming vs. Intema Solutions | Evolution Gaming vs. 888 Holdings | Evolution Gaming vs. Royal Wins | Evolution Gaming vs. Real Luck Group |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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