Correlation Between ZURICH INSURANCE and Direct Line
Can any of the company-specific risk be diversified away by investing in both ZURICH INSURANCE 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 ZURICH INSURANCE and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ZURICH INSURANCE GROUP and Direct Line Insurance, you can compare the effects of market volatilities on ZURICH INSURANCE 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 ZURICH INSURANCE with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZURICH INSURANCE and Direct Line.
Diversification Opportunities for ZURICH INSURANCE and Direct Line
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ZURICH and Direct is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ZURICH INSURANCE GROUP 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 ZURICH INSURANCE 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 ZURICH INSURANCE GROUP 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 ZURICH INSURANCE i.e., ZURICH INSURANCE and Direct Line go up and down completely randomly.
Pair Corralation between ZURICH INSURANCE and Direct Line
Assuming the 90 days trading horizon ZURICH INSURANCE GROUP is expected to under-perform the Direct Line. In addition to that, ZURICH INSURANCE is 1.31 times more volatile than Direct Line Insurance. It trades about -0.13 of its total potential returns per unit of risk. Direct Line Insurance is currently generating about 0.11 per unit of volatility. If you would invest 304.00 in Direct Line Insurance on October 23, 2024 and sell it today you would earn a total of 5.00 from holding Direct Line Insurance or generate 1.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ZURICH INSURANCE GROUP vs. Direct Line Insurance
Performance |
| Timeline |
| ZURICH INSURANCE |
| Direct Line Insurance |
ZURICH INSURANCE and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ZURICH INSURANCE and Direct Line
The main advantage of trading using opposite ZURICH INSURANCE and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZURICH INSURANCE 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.| ZURICH INSURANCE vs. SANOK RUBBER ZY | ZURICH INSURANCE vs. EAGLE MATERIALS | ZURICH INSURANCE vs. Heidelberg Materials AG | ZURICH INSURANCE vs. VULCAN MATERIALS |
| Direct Line vs. MAGNUM MINING EXP | Direct Line vs. MIRAMAR HOTEL INV | Direct Line vs. Zijin Mining Group | Direct Line vs. HYATT HOTELS A |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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