Correlation Between Direct Line and GoldMining
Can any of the company-specific risk be diversified away by investing in both Direct Line and GoldMining 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 GoldMining 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 GoldMining, you can compare the effects of market volatilities on Direct Line and GoldMining 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 GoldMining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and GoldMining.
Diversification Opportunities for Direct Line and GoldMining
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Direct and GoldMining is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining 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 GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Direct Line i.e., Direct Line and GoldMining go up and down completely randomly.
Pair Corralation between Direct Line and GoldMining
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 0.49 times more return on investment than GoldMining. However, Direct Line Insurance is 2.05 times less risky than GoldMining. It trades about -0.13 of its potential returns per unit of risk. GoldMining is currently generating about -0.16 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 Against |
| Strength | Insignificant |
| Accuracy | 63.64% |
| Values | Daily Returns |
Direct Line Insurance vs. GoldMining
Performance |
| Timeline |
| Direct Line Insurance |
| GoldMining |
Direct Line and GoldMining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and GoldMining
The main advantage of trading using opposite Direct Line and GoldMining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, GoldMining 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 GoldMining will offset losses from the drop in GoldMining'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 |
| GoldMining vs. Ross Stores | GoldMining vs. Zoom Video Communications | GoldMining vs. Cairo Communication SpA | GoldMining vs. Dalata Hotel Group |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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