Correlation Between Direct Line and ATRenew

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

Diversification Opportunities for Direct Line and ATRenew

0.44

Correlation Coefficient

Direct Line  ATRenew

Very weak diversification

The 3 months correlation between Direct and ATRenew is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and ATRenew Inc DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATRenew Inc DRC 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 ATRenew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATRenew Inc DRC has no effect on the direction of Direct Line i.e., Direct Line and ATRenew go up and down completely randomly.

Pair Corralation between Direct Line and ATRenew

Assuming the 90 days horizon Direct Line Insurance is expected to generate 0.53 times more return on investment than ATRenew. However, Direct Line Insurance is 1.87 times less risky than ATRenew. It trades about 0.26 of its potential returns per unit of risk. ATRenew Inc DRC is currently generating about -0.13 per unit of risk. If you would invest  1,265  in Direct Line Insurance on October 26, 2024 and sell it today you would earn a total of  111.00  from holding Direct Line Insurance or generate 8.77% return on investment over 90 days.

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

Direct Line Insurance  vs.  ATRenew Inc DRC

Direct Line Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Line Insurance are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Direct Line showed solid returns over the last few months and may actually be approaching a breakup point.

ATRenew Inc DRC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ATRenew Inc DRC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ATRenew is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Direct Line and ATRenew

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

The idea behind Direct Line Insurance and ATRenew Inc DRC 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.