Correlation Between Direct Line and Athene Holding

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

Diversification Opportunities for Direct Line and Athene Holding

0.71

Correlation Coefficient

Direct Line  Athene Holding

Poor diversification

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

Pair Corralation between Direct Line and Athene Holding

Assuming the 90 days horizon Direct Line Insurance is expected to generate 4.43 times more return on investment than Athene Holding. However, Direct Line is 4.43 times more volatile than Athene Holding. It trades about 0.14 of its potential returns per unit of risk. Athene Holding is currently generating about 0.1 per unit of risk. If you would invest  1,500  in Direct Line Insurance on May 5, 2025 and sell it today you would earn a total of  300.00  from holding Direct Line Insurance or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	88.89%
Values	Daily Returns

Direct Line Insurance  vs.  Athene Holding

Direct Line Insurance

Risk-Adjusted Performance

OK

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 fairly weak basic indicators, Direct Line showed solid returns over the last few months and may actually be approaching a breakup point.

Athene Holding

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Athene Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Athene Holding is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Direct Line and Athene Holding

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

The idea behind Direct Line Insurance and Athene Holding 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.