Correlation Between Direct Line and GreenX Metals

Can any of the company-specific risk be diversified away by investing in both Direct Line and GreenX Metals 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 GreenX Metals 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 GreenX Metals, you can compare the effects of market volatilities on Direct Line and GreenX Metals 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 GreenX Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and GreenX Metals.

Diversification Opportunities for Direct Line and GreenX Metals

-0.71

Correlation Coefficient

Direct Line  GreenX Metals

Pay attention - limited upside

The 3 months correlation between Direct and GreenX is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and GreenX Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenX Metals 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 GreenX Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenX Metals has no effect on the direction of Direct Line i.e., Direct Line and GreenX Metals go up and down completely randomly.

Pair Corralation between Direct Line and GreenX Metals

Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 0.26 times more return on investment than GreenX Metals. However, Direct Line Insurance is 3.92 times less risky than GreenX Metals. It trades about 0.22 of its potential returns per unit of risk. GreenX Metals is currently generating about 0.01 per unit of risk. If you would invest  27,800  in Direct Line Insurance on April 24, 2025 and sell it today you would earn a total of  2,700  from holding Direct Line Insurance or generate 9.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	79.03%
Values	Daily Returns

Direct Line Insurance  vs.  GreenX Metals

Direct Line Insurance

Risk-Adjusted Performance

Solid

Over the last 90 days Direct Line Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain technical and fundamental indicators, Direct Line may actually be approaching a critical reversion point that can send shares even higher in August 2025.

GreenX Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days GreenX Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, GreenX Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Direct Line and GreenX Metals

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

The idea behind Direct Line Insurance and GreenX Metals 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.