Correlation Between Direct Line and Atos SE

Can any of the company-specific risk be diversified away by investing in both Direct Line and Atos SE 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 Atos SE 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 Atos SE, you can compare the effects of market volatilities on Direct Line and Atos SE 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 Atos SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Atos SE.

Diversification Opportunities for Direct Line and Atos SE

-0.56

Correlation Coefficient

Direct Line  Atos SE

Excellent diversification

The 3 months correlation between Direct and Atos is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Atos SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atos SE 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 Atos SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atos SE has no effect on the direction of Direct Line i.e., Direct Line and Atos SE go up and down completely randomly.

Pair Corralation between Direct Line and Atos SE

Assuming the 90 days trading horizon Direct Line is expected to generate 19.99 times less return on investment than Atos SE. But when comparing it to its historical volatility, Direct Line Insurance is 31.29 times less risky than Atos SE. It trades about 0.18 of its potential returns per unit of risk. Atos SE is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  73.00  in Atos SE on October 23, 2024 and sell it today you would lose (72.76) from holding Atos SE or give up 99.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Direct Line Insurance  vs.  Atos SE

Direct Line Insurance

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Line Insurance are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Direct Line reported solid returns over the last few months and may actually be approaching a breakup point.

Atos SE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atos SE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Atos SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direct Line and Atos SE

The main advantage of trading using opposite Direct Line and Atos SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Atos SE 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 Atos SE will offset losses from the drop in Atos SE's long position.

The idea behind Direct Line Insurance and Atos SE 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 Transaction History module to view history of all your transactions and understand their impact on performance.