Correlation Between Ecclesiastical Insurance and Direct Line
Can any of the company-specific risk be diversified away by investing in both Ecclesiastical Insurance and Direct Line 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 Ecclesiastical Insurance and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecclesiastical Insurance Office and Direct Line Insurance, you can compare the effects of market volatilities on Ecclesiastical Insurance and Direct Line 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 Ecclesiastical Insurance with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecclesiastical Insurance and Direct Line.
Diversification Opportunities for Ecclesiastical Insurance and Direct Line
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ecclesiastical and Direct is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ecclesiastical Insurance Offic and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line Insurance and Ecclesiastical Insurance 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 Ecclesiastical Insurance Office are associated (or correlated) with Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of Ecclesiastical Insurance i.e., Ecclesiastical Insurance and Direct Line go up and down completely randomly.
Pair Corralation between Ecclesiastical Insurance and Direct Line
Assuming the 90 days trading horizon Ecclesiastical Insurance Office is expected to under-perform the Direct Line. But the stock apears to be less risky and, when comparing its historical volatility, Ecclesiastical Insurance Office is 7.56 times less risky than Direct Line. The stock trades about -0.05 of its potential returns per unit of risk. The Direct Line Insurance is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 16,680 in Direct Line Insurance on August 31, 2024 and sell it today you would earn a total of 5,760 from holding Direct Line Insurance or generate 34.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecclesiastical Insurance Offic vs. Direct Line Insurance
Performance |
| Timeline |
| Ecclesiastical Insurance |
| Direct Line Insurance |
Ecclesiastical Insurance and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecclesiastical Insurance and Direct Line
The main advantage of trading using opposite Ecclesiastical Insurance and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecclesiastical Insurance position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.| Ecclesiastical Insurance vs. Samsung Electronics Co | Ecclesiastical Insurance vs. Samsung Electronics Co | Ecclesiastical Insurance vs. Hyundai Motor | Ecclesiastical Insurance vs. Toyota Motor Corp |
| Direct Line vs. Various Eateries PLC | Direct Line vs. Taiwan Semiconductor Manufacturing | Direct Line vs. National Beverage Corp | Direct Line vs. Arrow Electronics |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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