Correlation Between Direct Line and Kinsale Capital
Can any of the company-specific risk be diversified away by investing in both Direct Line and Kinsale Capital 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 Kinsale Capital 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 Kinsale Capital Group, you can compare the effects of market volatilities on Direct Line and Kinsale Capital 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 Kinsale Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Kinsale Capital.
Diversification Opportunities for Direct Line and Kinsale Capital
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Direct and Kinsale is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Kinsale Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinsale Capital Group 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 Kinsale Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinsale Capital Group has no effect on the direction of Direct Line i.e., Direct Line and Kinsale Capital go up and down completely randomly.
Pair Corralation between Direct Line and Kinsale Capital
Assuming the 90 days horizon Direct Line Insurance is expected to generate 1.19 times more return on investment than Kinsale Capital. However, Direct Line is 1.19 times more volatile than Kinsale Capital Group. It trades about 0.06 of its potential returns per unit of risk. Kinsale Capital Group is currently generating about 0.04 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 Together |
| Strength | Very Weak |
| Accuracy | 92.61% |
| Values | Daily Returns |
Direct Line Insurance vs. Kinsale Capital Group
Performance |
| Timeline |
| Direct Line Insurance |
| Kinsale Capital Group |
Direct Line and Kinsale Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Kinsale Capital
The main advantage of trading using opposite Direct Line and Kinsale Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Kinsale Capital 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 Kinsale Capital will offset losses from the drop in Kinsale Capital'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 |
| Kinsale Capital vs. Aeye Inc | Kinsale Capital vs. Ep Emerging Markets | Kinsale Capital vs. LiCycle Holdings Corp | Kinsale Capital vs. SEI Investments |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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