Correlation Between Direct Line and Allient
Can any of the company-specific risk be diversified away by investing in both Direct Line and Allient 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 Allient 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 Allient, you can compare the effects of market volatilities on Direct Line and Allient 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 Allient. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Allient.
Diversification Opportunities for Direct Line and Allient
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Direct and Allient is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Allient in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allient 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 Allient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allient has no effect on the direction of Direct Line i.e., Direct Line and Allient go up and down completely randomly.
Pair Corralation between Direct Line and Allient
Assuming the 90 days horizon Direct Line Insurance is expected to generate 1.02 times more return on investment than Allient. However, Direct Line is 1.02 times more volatile than Allient. It trades about 0.06 of its potential returns per unit of risk. Allient is currently generating about -0.01 per unit of risk. If you would invest 854.00 in Direct Line Insurance on December 2, 2024 and sell it today you would earn a total of 510.00 from holding Direct Line Insurance or generate 59.72% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 85.14% |
Values | Daily Returns |
Direct Line Insurance vs. Allient
Performance |
Timeline |
Direct Line Insurance |
Allient |
Direct Line and Allient Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Direct Line and Allient
The main advantage of trading using opposite Direct Line and Allient positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Allient 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 Allient will offset losses from the drop in Allient's long position.Direct Line vs. MedX Health Corp | Direct Line vs. Omni Health | Direct Line vs. Sonida Senior Living | Direct Line vs. Lipocine |
Allient vs. Frontier Group Holdings | Allient vs. Keurig Dr Pepper | Allient vs. Constellation Brands Class | Allient vs. Alaska Air Group |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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