Correlation Between Diamond Hill and Compass Diversified
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Compass Diversified 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 Compass Diversified 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 Compass Diversified Holdings, you can compare the effects of market volatilities on Diamond Hill and Compass Diversified 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 Compass Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Compass Diversified.
Diversification Opportunities for Diamond Hill and Compass Diversified
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Diamond and Compass is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Compass Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified 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 Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of Diamond Hill i.e., Diamond Hill and Compass Diversified go up and down completely randomly.
Pair Corralation between Diamond Hill and Compass Diversified
Given the investment horizon of 90 days Diamond Hill is expected to generate 5.18 times less return on investment than Compass Diversified. But when comparing it to its historical volatility, Diamond Hill Investment is 1.12 times less risky than Compass Diversified. It trades about 0.01 of its potential returns per unit of risk. Compass Diversified Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,993 in Compass Diversified Holdings on August 31, 2024 and sell it today you would earn a total of 377.00 from holding Compass Diversified Holdings or generate 18.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamond Hill Investment vs. Compass Diversified Holdings
Performance |
| Timeline |
| Diamond Hill Investment |
| Compass Diversified |
Diamond Hill and Compass Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and Compass Diversified
The main advantage of trading using opposite Diamond Hill and Compass Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Compass Diversified 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 Compass Diversified will offset losses from the drop in Compass Diversified'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 |
| Compass Diversified vs. Matthews International | Compass Diversified vs. Steel Partners Holdings | Compass Diversified vs. Valmont Industries | Compass Diversified vs. Brookfield Business Partners |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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