Correlation Between Direct Line and Glencore Plc
Can any of the company-specific risk be diversified away by investing in both Direct Line and Glencore Plc 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 Direct Line and Glencore Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direct Line Insurance and Glencore plc, you can compare the effects of market volatilities on Direct Line and Glencore Plc 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 Direct Line with a short position of Glencore Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Glencore Plc.
Diversification Opportunities for Direct Line and Glencore Plc
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Direct and Glencore is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Glencore plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore plc and Direct Line 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 Direct Line Insurance are associated (or correlated) with Glencore Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore plc has no effect on the direction of Direct Line i.e., Direct Line and Glencore Plc go up and down completely randomly.
Pair Corralation between Direct Line and Glencore Plc
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 0.44 times more return on investment than Glencore Plc. However, Direct Line Insurance is 2.3 times less risky than Glencore Plc. It trades about 0.16 of its potential returns per unit of risk. Glencore plc is currently generating about -0.11 per unit of risk. If you would invest 305.00 in Direct Line Insurance on December 30, 2024 and sell it today you would earn a total of 32.00 from holding Direct Line Insurance or generate 10.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Direct Line Insurance vs. Glencore plc
Performance |
Timeline |
Direct Line Insurance |
Glencore plc |
Direct Line and Glencore Plc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Direct Line and Glencore Plc
The main advantage of trading using opposite Direct Line and Glencore Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Glencore Plc 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 Glencore Plc will offset losses from the drop in Glencore Plc's long position.Direct Line vs. Sumitomo Rubber Industries | Direct Line vs. Plastic Omnium | Direct Line vs. VITEC SOFTWARE GROUP | Direct Line vs. MAGIC SOFTWARE ENTR |
Glencore Plc vs. Sinopec Shanghai Petrochemical | Glencore Plc vs. Sumitomo Chemical | Glencore Plc vs. CAREER EDUCATION | Glencore Plc vs. Mitsui Chemicals |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
Share Portfolio Track or share privately all of your investments from the convenience of any device | |
Global Correlations Find global opportunities by holding instruments from different markets | |
Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |