Correlation Between Direct Line and IBU-tec Advanced

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

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

Diversification Opportunities for Direct Line and IBU-tec Advanced

0.5

Correlation Coefficient

Direct Line  IBU-tec Advanced

Very weak diversification

The 3 months correlation between Direct and IBU-tec is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and IBU tec advanced materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBU tec advanced and Direct Line 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 Direct Line Insurance are associated (or correlated) with IBU-tec Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBU tec advanced has no effect on the direction of Direct Line i.e., Direct Line and IBU-tec Advanced go up and down completely randomly.

Pair Corralation between Direct Line and IBU-tec Advanced

Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 0.39 times more return on investment than IBU-tec Advanced. However, Direct Line Insurance is 2.57 times less risky than IBU-tec Advanced. It trades about 0.08 of its potential returns per unit of risk. IBU tec advanced materials is currently generating about -0.03 per unit of risk. If you would invest  336.00  in Direct Line Insurance on March 31, 2025 and sell it today you would earn a total of  23.00  from holding Direct Line Insurance or generate 6.85% return on investment over 90 days.

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

Direct Line Insurance  vs.  IBU tec advanced materials

Direct Line Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Line Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Direct Line may actually be approaching a critical reversion point that can send shares even higher in July 2025.

IBU tec advanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days IBU tec advanced materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IBU-tec Advanced is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Direct Line and IBU-tec Advanced

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

The idea behind Direct Line Insurance and IBU tec advanced materials 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.