Correlation Between Direct Line and Kinsale Capital

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Direct Line and Kinsale Capital 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 Kinsale Capital 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 Kinsale Capital Group, you can compare the effects of market volatilities on Direct Line and Kinsale Capital 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 Kinsale Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Kinsale Capital.

Diversification Opportunities for Direct Line and Kinsale Capital

DirectKinsaleDiversified AwayDirectKinsaleDiversified Away100%
0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Direct and Kinsale is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Kinsale Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinsale Capital Group 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 Kinsale Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinsale Capital Group has no effect on the direction of Direct Line i.e., Direct Line and Kinsale Capital go up and down completely randomly.

Pair Corralation between Direct Line and Kinsale Capital

Assuming the 90 days horizon Direct Line Insurance is expected to generate 2.22 times more return on investment than Kinsale Capital. However, Direct Line is 2.22 times more volatile than Kinsale Capital Group. It trades about 0.13 of its potential returns per unit of risk. Kinsale Capital Group is currently generating about -0.08 per unit of risk. If you would invest  963.00  in Direct Line Insurance on October 15, 2024 and sell it today you would earn a total of  324.00  from holding Direct Line Insurance or generate 33.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Direct Line Insurance  vs.  Kinsale Capital Group

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20-100102030
JavaScript chart by amCharts 3.21.15DIISY KNSL
       Timeline  
Direct Line Insurance 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Direct Line Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Direct Line showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan89101112
Kinsale Capital Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Kinsale Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan420440460480500520540

Direct Line and Kinsale Capital Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-13.18-9.87-6.56-3.250.03.46.9210.4313.9517.47 0.020.040.060.080.10
JavaScript chart by amCharts 3.21.15DIISY KNSL
       Returns  

Pair Trading with Direct Line and Kinsale Capital

The main advantage of trading using opposite Direct Line and Kinsale Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Kinsale Capital 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 Kinsale Capital will offset losses from the drop in Kinsale Capital's long position.
The idea behind Direct Line Insurance and Kinsale Capital Group 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.
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 Commodity Directory module to find actively traded commodities issued by global exchanges.

Other Complementary Tools

Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Watchlist Optimization
Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm