Correlation Between Virgin Wines and Direct Line
Can any of the company-specific risk be diversified away by investing in both Virgin Wines 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 Virgin Wines and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virgin Wines UK and Direct Line Insurance, you can compare the effects of market volatilities on Virgin Wines 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 Virgin Wines with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virgin Wines and Direct Line.
Diversification Opportunities for Virgin Wines and Direct Line
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Virgin and Direct is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Wines UK 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 Virgin Wines 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 Virgin Wines UK 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 Virgin Wines i.e., Virgin Wines and Direct Line go up and down completely randomly.
Pair Corralation between Virgin Wines and Direct Line
Assuming the 90 days trading horizon Virgin Wines UK is expected to generate 4.3 times more return on investment than Direct Line. However, Virgin Wines is 4.3 times more volatile than Direct Line Insurance. It trades about 0.36 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.02 per unit of risk. If you would invest 3,050 in Virgin Wines UK on November 28, 2024 and sell it today you would earn a total of 650.00 from holding Virgin Wines UK or generate 21.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Virgin Wines UK vs. Direct Line Insurance
Performance |
| Timeline |
| Virgin Wines UK |
| Direct Line Insurance |
Virgin Wines and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Virgin Wines and Direct Line
The main advantage of trading using opposite Virgin Wines and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virgin Wines 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.| Virgin Wines vs. Samsung Electronics Co | Virgin Wines vs. Samsung Electronics Co | Virgin Wines vs. Samsung Electronics Co | Virgin Wines vs. Toyota Motor Corp |
| Direct Line vs. Heavitree Brewery | Direct Line vs. Air Products Chemicals | Direct Line vs. Ryanair Holdings plc | Direct Line vs. Zoom Video Communications |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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