Correlation Between Cheche Group and Direct Line

Can any of the company-specific risk be diversified away by investing in both Cheche Group 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 Cheche Group and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cheche Group Class and Direct Line Insurance, you can compare the effects of market volatilities on Cheche Group 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 Cheche Group with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheche Group and Direct Line.

Diversification Opportunities for Cheche Group and Direct Line

-0.09

Correlation Coefficient

Cheche Group  Direct Line

Good diversification

The 3 months correlation between Cheche and Direct is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Cheche Group Class 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 Cheche Group 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 Cheche Group Class 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 Cheche Group i.e., Cheche Group and Direct Line go up and down completely randomly.

Pair Corralation between Cheche Group and Direct Line

Considering the 90-day investment horizon Cheche Group Class is expected to generate 9.75 times more return on investment than Direct Line. However, Cheche Group is 9.75 times more volatile than Direct Line Insurance. It trades about 0.02 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.05 per unit of risk. If you would invest  1,039  in Cheche Group Class on October 11, 2024 and sell it today you would lose (951.00) from holding Cheche Group Class or give up 91.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.81%
Values	Daily Returns

Cheche Group Class  vs.  Direct Line Insurance

Cheche Group Class

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cheche Group Class are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, Cheche Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Direct Line Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Line Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Direct Line showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheche Group and Direct Line

The main advantage of trading using opposite Cheche Group and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheche Group 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.

The idea behind Cheche Group Class and Direct Line Insurance pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Stocks Directory module to find actively traded stocks across global markets.