Correlation Between Diamond Hill and Assured Guaranty
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Assured Guaranty 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 Diamond Hill and Assured Guaranty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamond Hill Investment and Assured Guaranty, you can compare the effects of market volatilities on Diamond Hill and Assured Guaranty 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 Diamond Hill with a short position of Assured Guaranty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Assured Guaranty.
Diversification Opportunities for Diamond Hill and Assured Guaranty
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Diamond and Assured is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty and Diamond Hill 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 Diamond Hill Investment are associated (or correlated) with Assured Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assured Guaranty has no effect on the direction of Diamond Hill i.e., Diamond Hill and Assured Guaranty go up and down completely randomly.
Pair Corralation between Diamond Hill and Assured Guaranty
Given the investment horizon of 90 days Diamond Hill is expected to generate 1.28 times less return on investment than Assured Guaranty. But when comparing it to its historical volatility, Diamond Hill Investment is 1.03 times less risky than Assured Guaranty. It trades about 0.21 of its potential returns per unit of risk. Assured Guaranty is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 8,476 in Assured Guaranty on August 28, 2024 and sell it today you would earn a total of 993.00 from holding Assured Guaranty or generate 11.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamond Hill Investment vs. Assured Guaranty
Performance |
| Timeline |
| Diamond Hill Investment |
| Assured Guaranty |
Diamond Hill and Assured Guaranty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and Assured Guaranty
The main advantage of trading using opposite Diamond Hill and Assured Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Assured Guaranty 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 Assured Guaranty will offset losses from the drop in Assured Guaranty's long position.| Diamond Hill vs. Federated Premier Municipal | Diamond Hill vs. Blackrock Muniyield | Diamond Hill vs. NXG NextGen Infrastructure | Diamond Hill vs. Federated Investors B |
| Assured Guaranty vs. Investors Title | Assured Guaranty vs. AMERISAFE | Assured Guaranty vs. Essent Group | Assured Guaranty vs. ICC Holdings |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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