Correlation Between Direct Line and Treasury Wine
Can any of the company-specific risk be diversified away by investing in both Direct Line and Treasury Wine 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 Treasury Wine 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 Treasury Wine Estates, you can compare the effects of market volatilities on Direct Line and Treasury Wine 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 Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Treasury Wine.
Diversification Opportunities for Direct Line and Treasury Wine
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Direct and Treasury is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates 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 Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of Direct Line i.e., Direct Line and Treasury Wine go up and down completely randomly.
Pair Corralation between Direct Line and Treasury Wine
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 1.24 times more return on investment than Treasury Wine. However, Direct Line is 1.24 times more volatile than Treasury Wine Estates. It trades about 0.1 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about -0.11 per unit of risk. If you would invest 302.00 in Direct Line Insurance on October 8, 2024 and sell it today you would earn a total of 7.00 from holding Direct Line Insurance or generate 2.32% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Direct Line Insurance vs. Treasury Wine Estates
Performance |
Timeline |
Direct Line Insurance |
Treasury Wine Estates |
Direct Line and Treasury Wine Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Direct Line and Treasury Wine
The main advantage of trading using opposite Direct Line and Treasury Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Treasury Wine 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 Treasury Wine will offset losses from the drop in Treasury Wine's long position.Direct Line vs. Superior Plus Corp | Direct Line vs. NMI Holdings | Direct Line vs. SIVERS SEMICONDUCTORS AB | Direct Line vs. Talanx AG |
Treasury Wine vs. APPLIED MATERIALS | Treasury Wine vs. Firan Technology Group | Treasury Wine vs. Alfa Financial Software | Treasury Wine vs. EAGLE MATERIALS |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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