Correlation Between Direct Line and Trupanion
Can any of the company-specific risk be diversified away by investing in both Direct Line and Trupanion 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 Trupanion 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 Trupanion, you can compare the effects of market volatilities on Direct Line and Trupanion 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 Trupanion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Trupanion.
Diversification Opportunities for Direct Line and Trupanion
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Direct and Trupanion is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Trupanion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trupanion 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 Trupanion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trupanion has no effect on the direction of Direct Line i.e., Direct Line and Trupanion go up and down completely randomly.
Pair Corralation between Direct Line and Trupanion
Assuming the 90 days horizon Direct Line Insurance is expected to generate 1.43 times more return on investment than Trupanion. However, Direct Line is 1.43 times more volatile than Trupanion. It trades about 0.13 of its potential returns per unit of risk. Trupanion is currently generating about 0.11 per unit of risk. If you would invest 915.00 in Direct Line Insurance on September 12, 2024 and sell it today you would earn a total of 338.00 from holding Direct Line Insurance or generate 36.94% 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. Trupanion
Performance |
Timeline |
Direct Line Insurance |
Trupanion |
Direct Line and Trupanion Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Direct Line and Trupanion
The main advantage of trading using opposite Direct Line and Trupanion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line position performs unexpectedly, Trupanion 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 Trupanion will offset losses from the drop in Trupanion's long position.Direct Line vs. Berkshire Hathaway | Direct Line vs. Berkshire Hathaway | Direct Line vs. Zurich Insurance Group | Direct Line vs. Zurich Insurance Group |
Trupanion vs. First American | Trupanion vs. Assurant | Trupanion vs. NMI Holdings | Trupanion vs. MGIC Investment Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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