Correlation Between Kingdee International and Direct Line

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

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

Diversification Opportunities for Kingdee International and Direct Line

0.49

Correlation Coefficient

Kingdee International  Direct Line

Very weak diversification

The 3 months correlation between Kingdee and Direct is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software 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 Kingdee International 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 Kingdee International Software 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 Kingdee International i.e., Kingdee International and Direct Line go up and down completely randomly.

Pair Corralation between Kingdee International and Direct Line

Assuming the 90 days trading horizon Kingdee International Software is expected to generate 5.14 times more return on investment than Direct Line. However, Kingdee International is 5.14 times more volatile than Direct Line Insurance. It trades about 0.07 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.0 per unit of risk. If you would invest  158.00  in Kingdee International Software on April 9, 2025 and sell it today you would earn a total of  5.00  from holding Kingdee International Software or generate 3.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.71%
Values	Daily Returns

Kingdee International Software  vs.  Direct Line Insurance

Kingdee International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kingdee International Software are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Kingdee International reported solid returns over the last few months and may actually be approaching a breakup point.

Direct Line Insurance

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Line Insurance are ranked lower than 21 (%) 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 Kingdee International and Direct Line

The main advantage of trading using opposite Kingdee International and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingdee International 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 Kingdee International Software 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.