Correlation Between SERI INDUSTRIAL and Direct Line
Can any of the company-specific risk be diversified away by investing in both SERI INDUSTRIAL 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 SERI INDUSTRIAL and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SERI INDUSTRIAL EO and Direct Line Insurance, you can compare the effects of market volatilities on SERI INDUSTRIAL 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 SERI INDUSTRIAL with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of SERI INDUSTRIAL and Direct Line.
Diversification Opportunities for SERI INDUSTRIAL and Direct Line
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SERI and Direct is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding SERI INDUSTRIAL EO 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 SERI INDUSTRIAL 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 SERI INDUSTRIAL EO 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 SERI INDUSTRIAL i.e., SERI INDUSTRIAL and Direct Line go up and down completely randomly.
Pair Corralation between SERI INDUSTRIAL and Direct Line
Assuming the 90 days trading horizon SERI INDUSTRIAL EO is expected to under-perform the Direct Line. In addition to that, SERI INDUSTRIAL is 1.06 times more volatile than Direct Line Insurance. It trades about -0.04 of its total potential returns per unit of risk. Direct Line Insurance is currently generating about 0.04 per unit of volatility. If you would invest 192.00 in Direct Line Insurance on October 11, 2024 and sell it today you would earn a total of 116.00 from holding Direct Line Insurance or generate 60.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SERI INDUSTRIAL EO vs. Direct Line Insurance
Performance |
| Timeline |
| SERI INDUSTRIAL EO |
| Direct Line Insurance |
SERI INDUSTRIAL and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SERI INDUSTRIAL and Direct Line
The main advantage of trading using opposite SERI INDUSTRIAL and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SERI INDUSTRIAL 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.| SERI INDUSTRIAL vs. TOREX SEMICONDUCTOR LTD | SERI INDUSTRIAL vs. Fast Retailing Co | SERI INDUSTRIAL vs. Tradeweb Markets | SERI INDUSTRIAL vs. FAST RETAIL ADR |
| Direct Line vs. Sinopec Shanghai Petrochemical | Direct Line vs. X FAB Silicon Foundries | Direct Line vs. SILICON LABORATOR | Direct Line vs. China BlueChemical |
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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