Correlation Between Direct Line and AMG Advanced
Can any of the company-specific risk be diversified away by investing in both Direct Line and AMG Advanced 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 AMG Advanced 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 AMG Advanced Metallurgical, you can compare the effects of market volatilities on Direct Line and AMG Advanced 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 AMG Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and AMG Advanced.
Diversification Opportunities for Direct Line and AMG Advanced
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Direct and AMG is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and AMG Advanced Metallurgical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMG Advanced Metallu 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 AMG Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMG Advanced Metallu has no effect on the direction of Direct Line i.e., Direct Line and AMG Advanced go up and down completely randomly.
Pair Corralation between Direct Line and AMG Advanced
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 0.77 times more return on investment than AMG Advanced. However, Direct Line Insurance is 1.31 times less risky than AMG Advanced. It trades about -0.13 of its potential returns per unit of risk. AMG Advanced Metallurgical is currently generating about -0.23 per unit of risk. If you would invest 16,620 in Direct Line Insurance on August 30, 2024 and sell it today you would lose (750.00) from holding Direct Line Insurance or give up 4.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Direct Line Insurance vs. AMG Advanced Metallurgical
Performance |
| Timeline |
| Direct Line Insurance |
| AMG Advanced Metallu |
Direct Line and AMG Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and AMG Advanced
The main advantage of trading using opposite Direct Line and AMG Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, AMG Advanced 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 AMG Advanced will offset losses from the drop in AMG Advanced's long position.| Direct Line vs. Toyota Motor Corp | Direct Line vs. SoftBank Group Corp | Direct Line vs. OTP Bank Nyrt | Direct Line vs. Las Vegas Sands |
| AMG Advanced vs. Griffin Mining | AMG Advanced vs. Greenroc Mining PLC | AMG Advanced vs. International Biotechnology Trust | AMG Advanced vs. AfriTin Mining |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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