Correlation Between SOUTHERN and Direct Line
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By analyzing existing cross correlation between SOUTHERN CALIF EDISON and Direct Line Insurance, you can compare the effects of market volatilities on SOUTHERN 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 SOUTHERN with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHERN and Direct Line.
Diversification Opportunities for SOUTHERN and Direct Line
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SOUTHERN and Direct is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHERN CALIF EDISON 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 SOUTHERN 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 SOUTHERN CALIF EDISON 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 SOUTHERN i.e., SOUTHERN and Direct Line go up and down completely randomly.
Pair Corralation between SOUTHERN and Direct Line
Assuming the 90 days trading horizon SOUTHERN is expected to generate 7.28 times less return on investment than Direct Line. But when comparing it to its historical volatility, SOUTHERN CALIF EDISON is 2.92 times less risky than Direct Line. It trades about 0.02 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 850.00 in Direct Line Insurance on September 4, 2024 and sell it today you would earn a total of 317.00 from holding Direct Line Insurance or generate 37.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 74.35% |
| Values | Daily Returns |
SOUTHERN CALIF EDISON vs. Direct Line Insurance
Performance |
| Timeline |
| SOUTHERN CALIF EDISON |
| Direct Line Insurance |
SOUTHERN and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SOUTHERN and Direct Line
The main advantage of trading using opposite SOUTHERN and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHERN 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.| SOUTHERN vs. Arrow Electronics | SOUTHERN vs. Nok Airlines Public | SOUTHERN vs. Aegean Airlines SA | SOUTHERN vs. Asure Software |
| Direct Line vs. MACOM Technology Solutions | Direct Line vs. Kulicke and Soffa | Direct Line vs. Delek Drilling | Direct Line vs. Entegris |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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