Correlation Between Mill City and Direct Line

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

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

Diversification Opportunities for Mill City and Direct Line

0.18

Correlation Coefficient

Mill City  Direct Line

Average diversification

The 3 months correlation between Mill and Direct is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Mill City Ventures 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 Mill City 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 Mill City Ventures 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 Mill City i.e., Mill City and Direct Line go up and down completely randomly.

Pair Corralation between Mill City and Direct Line

Given the investment horizon of 90 days Mill City Ventures is expected to generate 1.42 times more return on investment than Direct Line. However, Mill City is 1.42 times more volatile than Direct Line Insurance. It trades about 0.16 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.13 per unit of risk. If you would invest  196.00  in Mill City Ventures on October 12, 2024 and sell it today you would earn a total of  127.00  from holding Mill City Ventures or generate 64.8% return on investment over 90 days.

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

Mill City Ventures  vs.  Direct Line Insurance

Mill City Ventures

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mill City Ventures are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mill City unveiled solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with Mill City and Direct Line

The main advantage of trading using opposite Mill City and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mill City 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 Mill City Ventures 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.