Correlation Between AMCON Distributing and Direct Line

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

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

Diversification Opportunities for AMCON Distributing and Direct Line

0.54

Correlation Coefficient

AMCON Distributing  Direct Line

Very weak diversification

The 3 months correlation between AMCON and Direct is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding AMCON Distributing 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 AMCON Distributing 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 AMCON Distributing 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 AMCON Distributing i.e., AMCON Distributing and Direct Line go up and down completely randomly.

Pair Corralation between AMCON Distributing and Direct Line

Considering the 90-day investment horizon AMCON Distributing is expected to generate 32.05 times less return on investment than Direct Line. In addition to that, AMCON Distributing is 1.09 times more volatile than Direct Line Insurance. It trades about 0.0 of its total potential returns per unit of risk. Direct Line Insurance is currently generating about 0.04 per unit of volatility. If you would invest  857.00  in Direct Line Insurance on September 27, 2024 and sell it today you would earn a total of  408.00  from holding Direct Line Insurance or generate 47.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.34%
Values	Daily Returns

AMCON Distributing  vs.  Direct Line Insurance

AMCON Distributing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Direct Line Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Line Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Direct Line showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AMCON Distributing and Direct Line

The main advantage of trading using opposite AMCON Distributing and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMCON Distributing 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 AMCON Distributing 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.