Correlation Between Metals Exploration and Direct Line
Can any of the company-specific risk be diversified away by investing in both Metals Exploration 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 Metals Exploration and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metals Exploration Plc and Direct Line Insurance, you can compare the effects of market volatilities on Metals Exploration 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 Metals Exploration with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metals Exploration and Direct Line.
Diversification Opportunities for Metals Exploration and Direct Line
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Metals and Direct is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Metals Exploration Plc 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 Metals Exploration 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 Metals Exploration Plc 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 Metals Exploration i.e., Metals Exploration and Direct Line go up and down completely randomly.
Pair Corralation between Metals Exploration and Direct Line
Assuming the 90 days trading horizon Metals Exploration Plc is expected to generate 1.22 times more return on investment than Direct Line. However, Metals Exploration is 1.22 times more volatile than Direct Line Insurance. It trades about 0.1 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.05 per unit of risk. If you would invest 170.00 in Metals Exploration Plc on September 2, 2024 and sell it today you would earn a total of 400.00 from holding Metals Exploration Plc or generate 235.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metals Exploration Plc vs. Direct Line Insurance
Performance |
| Timeline |
| Metals Exploration Plc |
| Direct Line Insurance |
Metals Exploration and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metals Exploration and Direct Line
The main advantage of trading using opposite Metals Exploration and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metals Exploration 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.| Metals Exploration vs. Bankers Investment Trust | Metals Exploration vs. New Residential Investment | Metals Exploration vs. Oakley Capital Investments | Metals Exploration vs. Sydbank |
| Direct Line vs. Gaztransport et Technigaz | Direct Line vs. International Biotechnology Trust | Direct Line vs. DXC Technology Co | Direct Line vs. Spotify Technology SA |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |