Correlation Between The Arbitrage and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both The Arbitrage and Diamond Hill 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 The Arbitrage and Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Arbitrage Fund and Diamond Hill Long Short, you can compare the effects of market volatilities on The Arbitrage and Diamond Hill 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 The Arbitrage with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Arbitrage and Diamond Hill.
Diversification Opportunities for The Arbitrage and Diamond Hill
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between The and Diamond is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Fund and Diamond Hill Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Long and The Arbitrage 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 The Arbitrage Fund are associated (or correlated) with Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Long has no effect on the direction of The Arbitrage i.e., The Arbitrage and Diamond Hill go up and down completely randomly.
Pair Corralation between The Arbitrage and Diamond Hill
Assuming the 90 days horizon The Arbitrage is expected to generate 2.06 times less return on investment than Diamond Hill. But when comparing it to its historical volatility, The Arbitrage Fund is 1.75 times less risky than Diamond Hill. It trades about 0.05 of its potential returns per unit of risk. Diamond Hill Long Short is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,847 in Diamond Hill Long Short on September 1, 2024 and sell it today you would earn a total of 17.00 from holding Diamond Hill Long Short or generate 0.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
The Arbitrage Fund vs. Diamond Hill Long Short
Performance |
| Timeline |
| The Arbitrage |
| Diamond Hill Long |
The Arbitrage and Diamond Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The Arbitrage and Diamond Hill
The main advantage of trading using opposite The Arbitrage and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Arbitrage position performs unexpectedly, Diamond Hill 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 Diamond Hill will offset losses from the drop in Diamond Hill's long position.| The Arbitrage vs. The Merger Fund | The Arbitrage vs. Calamos Market Neutral | The Arbitrage vs. Hussman Strategic Growth | The Arbitrage vs. Gateway Fund Class |
| Diamond Hill vs. Franklin Adjustable Government | Diamond Hill vs. Government Securities Fund | Diamond Hill vs. Franklin Government Money | Diamond Hill vs. Dunham Porategovernment Bond |
Check out your portfolio center.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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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