Correlation Between REINET INVESTMENTS and Direct Line
Can any of the company-specific risk be diversified away by investing in both REINET INVESTMENTS 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 REINET INVESTMENTS and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REINET INVESTMENTS SCA and Direct Line Insurance, you can compare the effects of market volatilities on REINET INVESTMENTS 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 REINET INVESTMENTS with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of REINET INVESTMENTS and Direct Line.
Diversification Opportunities for REINET INVESTMENTS and Direct Line
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between REINET and Direct is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding REINET INVESTMENTS SCA 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 REINET INVESTMENTS 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 REINET INVESTMENTS SCA 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 REINET INVESTMENTS i.e., REINET INVESTMENTS and Direct Line go up and down completely randomly.
Pair Corralation between REINET INVESTMENTS and Direct Line
Assuming the 90 days horizon REINET INVESTMENTS SCA is expected to generate 4.5 times more return on investment than Direct Line. However, REINET INVESTMENTS is 4.5 times more volatile than Direct Line Insurance. It trades about 0.05 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.15 per unit of risk. If you would invest 2,360 in REINET INVESTMENTS SCA on November 5, 2024 and sell it today you would earn a total of 60.00 from holding REINET INVESTMENTS SCA or generate 2.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
REINET INVESTMENTS SCA vs. Direct Line Insurance
Performance |
| Timeline |
| REINET INVESTMENTS SCA |
| Direct Line Insurance |
REINET INVESTMENTS and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REINET INVESTMENTS and Direct Line
The main advantage of trading using opposite REINET INVESTMENTS and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REINET INVESTMENTS 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.| REINET INVESTMENTS vs. ARROW ELECTRONICS | REINET INVESTMENTS vs. UMC Electronics Co | REINET INVESTMENTS vs. Arrow Electronics | REINET INVESTMENTS vs. Benchmark Electronics |
| Direct Line vs. LIFEWAY FOODS | Direct Line vs. United Natural Foods | Direct Line vs. The Hanover Insurance | Direct Line vs. Tyson Foods |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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