Correlation Between Funko and Direct Line

Can any of the company-specific risk be diversified away by investing in both Funko and Direct Line 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 Funko and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Funko Inc and Direct Line Insurance, you can compare the effects of market volatilities on Funko and Direct Line 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 Funko with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Funko and Direct Line.

Diversification Opportunities for Funko and Direct Line

-0.44

Correlation Coefficient

Funko  Direct Line

Very good diversification

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

Pair Corralation between Funko and Direct Line

Given the investment horizon of 90 days Funko Inc is expected to under-perform the Direct Line. In addition to that, Funko is 1.79 times more volatile than Direct Line Insurance. It trades about -0.24 of its total potential returns per unit of risk. Direct Line Insurance is currently generating about 0.14 per unit of volatility. If you would invest  1,212  in Direct Line Insurance on December 20, 2024 and sell it today you would earn a total of  201.00  from holding Direct Line Insurance or generate 16.58% return on investment over 90 days.

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

Funko Inc  vs.  Direct Line Insurance

Funko Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Funko Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking signals remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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. In spite of fairly fragile basic indicators, Direct Line showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Funko and Direct Line

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

The idea behind Funko Inc and Direct Line Insurance 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.