Correlation Between Direct Line and OS Therapies
Can any of the company-specific risk be diversified away by investing in both Direct Line and OS Therapies 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 OS Therapies 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 OS Therapies Incorporated, you can compare the effects of market volatilities on Direct Line and OS Therapies 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 OS Therapies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and OS Therapies.
Diversification Opportunities for Direct Line and OS Therapies
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Direct and OSTX is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and OS Therapies Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OS Therapies 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 OS Therapies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OS Therapies has no effect on the direction of Direct Line i.e., Direct Line and OS Therapies go up and down completely randomly.
Pair Corralation between Direct Line and OS Therapies
Assuming the 90 days horizon Direct Line is expected to generate 1.59 times less return on investment than OS Therapies. But when comparing it to its historical volatility, Direct Line Insurance is 3.56 times less risky than OS Therapies. It trades about 0.09 of its potential returns per unit of risk. OS Therapies Incorporated is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 251.00 in OS Therapies Incorporated on November 8, 2024 and sell it today you would lose (41.00) from holding OS Therapies Incorporated or give up 16.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 62.62% |
| Values | Daily Returns |
Direct Line Insurance vs. OS Therapies Incorporated
Performance |
| Timeline |
| Direct Line Insurance |
| OS Therapies |
Direct Line and OS Therapies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and OS Therapies
The main advantage of trading using opposite Direct Line and OS Therapies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, OS Therapies 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 OS Therapies will offset losses from the drop in OS Therapies' long position.| Direct Line vs. Tandy Leather Factory | Direct Line vs. Victorias Secret Co | Direct Line vs. Gildan Activewear | Direct Line vs. Nordic Semiconductor ASA |
| OS Therapies vs. China Southern Airlines | OS Therapies vs. Merit Medical Systems | OS Therapies vs. El Al Israel | OS Therapies vs. Frontier Group Holdings |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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