Correlation Between Direct Line and Endeavour Mining
Can any of the company-specific risk be diversified away by investing in both Direct Line and Endeavour Mining 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 Endeavour Mining 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 Endeavour Mining Corp, you can compare the effects of market volatilities on Direct Line and Endeavour Mining 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 Endeavour Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Endeavour Mining.
Diversification Opportunities for Direct Line and Endeavour Mining
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Direct and Endeavour is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Endeavour Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endeavour Mining Corp 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 Endeavour Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endeavour Mining Corp has no effect on the direction of Direct Line i.e., Direct Line and Endeavour Mining go up and down completely randomly.
Pair Corralation between Direct Line and Endeavour Mining
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 1.5 times more return on investment than Endeavour Mining. However, Direct Line is 1.5 times more volatile than Endeavour Mining Corp. It trades about 0.05 of its potential returns per unit of risk. Endeavour Mining Corp is currently generating about -0.01 per unit of risk. If you would invest 15,994 in Direct Line Insurance on September 2, 2024 and sell it today you would earn a total of 7,486 from holding Direct Line Insurance or generate 46.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direct Line Insurance vs. Endeavour Mining Corp
Performance |
| Timeline |
| Direct Line Insurance |
| Endeavour Mining Corp |
Direct Line and Endeavour Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Endeavour Mining
The main advantage of trading using opposite Direct Line and Endeavour Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Endeavour Mining 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 Endeavour Mining will offset losses from the drop in Endeavour Mining's long position.| Direct Line vs. Gaztransport et Technigaz | Direct Line vs. International Biotechnology Trust | Direct Line vs. DXC Technology Co | Direct Line vs. Spotify Technology SA |
| Endeavour Mining vs. Everyman Media Group | Endeavour Mining vs. Schweiter Technologies AG | Endeavour Mining vs. XLMedia PLC | Endeavour Mining vs. PureTech Health plc |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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