Correlation Between Direct Line and Lai Sun

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Direct Line and Lai Sun 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 Lai Sun 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 Lai Sun Garment, you can compare the effects of market volatilities on Direct Line and Lai Sun 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 Lai Sun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Lai Sun.

Diversification Opportunities for Direct Line and Lai Sun

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Direct and Lai is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Lai Sun Garment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lai Sun Garment 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 Lai Sun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lai Sun Garment has no effect on the direction of Direct Line i.e., Direct Line and Lai Sun go up and down completely randomly.

Pair Corralation between Direct Line and Lai Sun

Assuming the 90 days horizon Direct Line Insurance is expected to generate 0.5 times more return on investment than Lai Sun. However, Direct Line Insurance is 2.0 times less risky than Lai Sun. It trades about 0.07 of its potential returns per unit of risk. Lai Sun Garment is currently generating about -0.07 per unit of risk. If you would invest  843.00  in Direct Line Insurance on October 22, 2024 and sell it today you would earn a total of  435.00  from holding Direct Line Insurance or generate 51.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy97.8%
ValuesDaily Returns

Direct Line Insurance  vs.  Lai Sun Garment

 Performance 
       Timeline  
Direct Line Insurance 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Direct Line Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Direct Line showed solid returns over the last few months and may actually be approaching a breakup point.
Lai Sun Garment 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Lai Sun Garment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Direct Line and Lai Sun Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Direct Line and Lai Sun

The main advantage of trading using opposite Direct Line and Lai Sun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Lai Sun 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 Lai Sun will offset losses from the drop in Lai Sun's long position.
The idea behind Direct Line Insurance and Lai Sun Garment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

Other Complementary Tools

Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Pattern Recognition
Use different Pattern Recognition models to time the market across multiple global exchanges
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities
Content Syndication
Quickly integrate customizable finance content to your own investment portal