Correlation Between Old Republic and Direct Line
Can any of the company-specific risk be diversified away by investing in both Old Republic 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 Old Republic and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Republic International and Direct Line Insurance, you can compare the effects of market volatilities on Old Republic 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 Old Republic with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Republic and Direct Line.
Diversification Opportunities for Old Republic and Direct Line
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Old and Direct is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International 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 Old Republic 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 Old Republic International 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 Old Republic i.e., Old Republic and Direct Line go up and down completely randomly.
Pair Corralation between Old Republic and Direct Line
Considering the 90-day investment horizon Old Republic is expected to generate 1.19 times less return on investment than Direct Line. But when comparing it to its historical volatility, Old Republic International is 1.63 times less risky than Direct Line. It trades about 0.18 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,267 in Direct Line Insurance on December 27, 2024 and sell it today you would earn a total of 193.00 from holding Direct Line Insurance or generate 15.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Old Republic International vs. Direct Line Insurance
Performance |
Timeline |
Old Republic Interna |
Direct Line Insurance |
Old Republic and Direct Line Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Old Republic and Direct Line
The main advantage of trading using opposite Old Republic and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Republic 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.Old Republic vs. Axa Equitable Holdings | Old Republic vs. American International Group | Old Republic vs. Arch Capital Group | Old Republic vs. Sun Life Financial |
Direct Line vs. Greentown Management Holdings | Direct Line vs. Nordic Semiconductor ASA | Direct Line vs. Arm Holdings plc | Direct Line vs. Ameriprise Financial |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
Other Complementary Tools
Money Managers Screen money managers from public funds and ETFs managed around the world | |
Commodity Directory Find actively traded commodities issued by global exchanges | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |