Correlation Between Direct Line and Fidelity National

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

Diversification Opportunities for Direct Line and Fidelity National

-0.67

Correlation Coefficient

Direct Line  Fidelity National

Excellent diversification

The 3 months correlation between Direct and Fidelity is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Fidelity National Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity National 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 Fidelity National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity National has no effect on the direction of Direct Line i.e., Direct Line and Fidelity National go up and down completely randomly.

Pair Corralation between Direct Line and Fidelity National

Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 0.33 times more return on investment than Fidelity National. However, Direct Line Insurance is 3.02 times less risky than Fidelity National. It trades about 0.15 of its potential returns per unit of risk. Fidelity National Information is currently generating about -0.07 per unit of risk. If you would invest  310.00  in Direct Line Insurance on December 24, 2024 and sell it today you would earn a total of  27.00  from holding Direct Line Insurance or generate 8.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Direct Line Insurance  vs.  Fidelity National Information

Direct Line Insurance

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Line Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Direct Line may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Fidelity National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity National Information has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Direct Line and Fidelity National

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

The idea behind Direct Line Insurance and Fidelity National Information 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.