Correlation Between Direct Line and Dolly Varden
Can any of the company-specific risk be diversified away by investing in both Direct Line and Dolly Varden 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 Dolly Varden 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 Dolly Varden Silver, you can compare the effects of market volatilities on Direct Line and Dolly Varden 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 Dolly Varden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Dolly Varden.
Diversification Opportunities for Direct Line and Dolly Varden
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Direct and Dolly is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Dolly Varden Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolly Varden Silver 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 Dolly Varden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolly Varden Silver has no effect on the direction of Direct Line i.e., Direct Line and Dolly Varden go up and down completely randomly.
Pair Corralation between Direct Line and Dolly Varden
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 0.4 times more return on investment than Dolly Varden. However, Direct Line Insurance is 2.51 times less risky than Dolly Varden. It trades about -0.18 of its potential returns per unit of risk. Dolly Varden Silver is currently generating about -0.33 per unit of risk. If you would invest 16,850 in Direct Line Insurance on August 27, 2024 and sell it today you would lose (1,030) from holding Direct Line Insurance or give up 6.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 71.43% |
| Values | Daily Returns |
Direct Line Insurance vs. Dolly Varden Silver
Performance |
| Timeline |
| Direct Line Insurance |
| Dolly Varden Silver |
Direct Line and Dolly Varden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Dolly Varden
The main advantage of trading using opposite Direct Line and Dolly Varden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Dolly Varden 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 Dolly Varden will offset losses from the drop in Dolly Varden's long position.| Direct Line vs. Argo Group Limited | Direct Line vs. Quantum Blockchain Technologies | Direct Line vs. Versarien PLC | Direct Line vs. Malvern International |
| Dolly Varden vs. Livermore Investments Group | Dolly Varden vs. Greenroc Mining PLC | Dolly Varden vs. Schroders Investment Trusts | Dolly Varden vs. iShares Physical Silver |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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