Correlation Between Direct Line and Concurrent Technologies
Can any of the company-specific risk be diversified away by investing in both Direct Line and Concurrent Technologies 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 Concurrent Technologies 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 Concurrent Technologies Plc, you can compare the effects of market volatilities on Direct Line and Concurrent Technologies 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 Concurrent Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Concurrent Technologies.
Diversification Opportunities for Direct Line and Concurrent Technologies
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Direct and Concurrent is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Concurrent Technologies Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Concurrent Technologies 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 Concurrent Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Concurrent Technologies has no effect on the direction of Direct Line i.e., Direct Line and Concurrent Technologies go up and down completely randomly.
Pair Corralation between Direct Line and Concurrent Technologies
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 0.42 times more return on investment than Concurrent Technologies. However, Direct Line Insurance is 2.36 times less risky than Concurrent Technologies. It trades about 0.17 of its potential returns per unit of risk. Concurrent Technologies Plc is currently generating about -0.22 per unit of risk. If you would invest 26,840 in Direct Line Insurance on December 1, 2024 and sell it today you would earn a total of 920.00 from holding Direct Line Insurance or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direct Line Insurance vs. Concurrent Technologies Plc
Performance |
| Timeline |
| Direct Line Insurance |
| Concurrent Technologies |
Direct Line and Concurrent Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Concurrent Technologies
The main advantage of trading using opposite Direct Line and Concurrent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Concurrent Technologies 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 Concurrent Technologies will offset losses from the drop in Concurrent Technologies' long position.| Direct Line vs. Molson Coors Beverage | Direct Line vs. MoneysupermarketCom Group PLC | Direct Line vs. FC Investment Trust | Direct Line vs. Tyson Foods Cl |
| Concurrent Technologies vs. McEwen Mining | Concurrent Technologies vs. Odfjell Drilling | Concurrent Technologies vs. Lloyds Banking Group | Concurrent Technologies vs. URU Metals |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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