Correlation Between Corning Incorporated and Direct Line

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

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

Diversification Opportunities for Corning Incorporated and Direct Line

0.26

Correlation Coefficient

Corning Incorporated  Direct Line

Modest diversification

The 3 months correlation between Corning and Direct is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Corning Incorporated 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 Corning Incorporated 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 Corning Incorporated 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 Corning Incorporated i.e., Corning Incorporated and Direct Line go up and down completely randomly.

Pair Corralation between Corning Incorporated and Direct Line

Considering the 90-day investment horizon Corning Incorporated is expected to under-perform the Direct Line. In addition to that, Corning Incorporated is 1.2 times more volatile than Direct Line Insurance. It trades about -0.05 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  1,253  in Direct Line Insurance on October 11, 2024 and sell it today you would earn a total of  34.00  from holding Direct Line Insurance or generate 2.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Corning Incorporated  vs.  Direct Line Insurance

Corning Incorporated

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Corning Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable essential indicators, Corning Incorporated is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Direct Line Insurance

Risk-Adjusted Performance

9 of 100

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 weak basic indicators, Direct Line showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Corning Incorporated and Direct Line

The main advantage of trading using opposite Corning Incorporated and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corning Incorporated 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 Corning Incorporated 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.