Correlation Between NYSE Composite and Direct Line
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Direct Line Insurance, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Direct Line.
Diversification Opportunities for NYSE Composite and Direct Line
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and Direct is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Direct Line go up and down completely randomly.
Pair Corralation between NYSE Composite and Direct Line
Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.41 times less return on investment than Direct Line. But when comparing it to its historical volatility, NYSE Composite is 7.53 times less risky than Direct Line. It trades about 0.17 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,000.00 in Direct Line Insurance on September 2, 2024 and sell it today you would earn a total of 181.00 from holding Direct Line Insurance or generate 18.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Direct Line Insurance
Performance |
| Timeline |
NYSE Composite and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Direct Line Insurance
Pair trading matchups for Direct Line
Pair Trading with NYSE Composite and Direct Line
The main advantage of trading using opposite NYSE Composite and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Simon Property Group | NYSE Composite vs. Merit Medical Systems | NYSE Composite vs. Catalent | NYSE Composite vs. Titan Machinery |
| Direct Line vs. Ryanair Holdings PLC | Direct Line vs. Air Transport Services | Direct Line vs. Xunlei Ltd Adr | Direct Line vs. Boston Omaha Corp |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |