Correlation Between SAN MIGUEL and Direct Line

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

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

Diversification Opportunities for SAN MIGUEL and Direct Line

-0.77

Correlation Coefficient

SAN MIGUEL  Direct Line

Pay attention - limited upside

The 3 months correlation between SAN and Direct is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding SAN MIGUEL BREWERY 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 SAN MIGUEL 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 SAN MIGUEL BREWERY 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 SAN MIGUEL i.e., SAN MIGUEL and Direct Line go up and down completely randomly.

Pair Corralation between SAN MIGUEL and Direct Line

Assuming the 90 days trading horizon SAN MIGUEL is expected to generate 11.11 times less return on investment than Direct Line. But when comparing it to its historical volatility, SAN MIGUEL BREWERY is 1.1 times less risky than Direct Line. It trades about 0.02 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  203.00  in Direct Line Insurance on October 26, 2024 and sell it today you would earn a total of  112.00  from holding Direct Line Insurance or generate 55.17% return on investment over 90 days.

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

SAN MIGUEL BREWERY  vs.  Direct Line Insurance

SAN MIGUEL BREWERY

Risk-Adjusted Performance

1 of 100

Weak

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

Direct Line Insurance

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Line Insurance are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Direct Line reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAN MIGUEL and Direct Line

The main advantage of trading using opposite SAN MIGUEL and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAN MIGUEL 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 SAN MIGUEL BREWERY 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.