Correlation Between Diamond Hill and Crescent Capital
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Crescent Capital 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 Crescent Capital 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 Crescent Capital BDC, you can compare the effects of market volatilities on Diamond Hill and Crescent Capital 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 Crescent Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Crescent Capital.
Diversification Opportunities for Diamond Hill and Crescent Capital
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Diamond and Crescent is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Crescent Capital BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Capital BDC 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 Crescent Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Capital BDC has no effect on the direction of Diamond Hill i.e., Diamond Hill and Crescent Capital go up and down completely randomly.
Pair Corralation between Diamond Hill and Crescent Capital
Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Crescent Capital. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Hill Investment is 1.59 times less risky than Crescent Capital. The stock trades about -0.26 of its potential returns per unit of risk. The Crescent Capital BDC is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 1,725 in Crescent Capital BDC on January 18, 2025 and sell it today you would lose (175.00) from holding Crescent Capital BDC or give up 10.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Diamond Hill Investment vs. Crescent Capital BDC
Performance |
| Timeline |
| Diamond Hill Investment |
| Crescent Capital BDC |
Diamond Hill and Crescent Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and Crescent Capital
The main advantage of trading using opposite Diamond Hill and Crescent Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Crescent Capital 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 Crescent Capital will offset losses from the drop in Crescent Capital'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 |
| Crescent Capital vs. BlackRock TCP Capital | Crescent Capital vs. Triplepoint Venture Growth | Crescent Capital vs. Sixth Street Specialty | Crescent Capital vs. Golub Capital BDC |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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