Correlation Between Diamond Hill and Embrace Change
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Embrace Change 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 Embrace Change 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 Embrace Change Acquisition, you can compare the effects of market volatilities on Diamond Hill and Embrace Change 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 Embrace Change. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Embrace Change.
Diversification Opportunities for Diamond Hill and Embrace Change
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Diamond and Embrace is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Embrace Change Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embrace Change Acqui 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 Embrace Change. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embrace Change Acqui has no effect on the direction of Diamond Hill i.e., Diamond Hill and Embrace Change go up and down completely randomly.
Pair Corralation between Diamond Hill and Embrace Change
Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Embrace Change. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Hill Investment is 13.85 times less risky than Embrace Change. The stock trades about -0.12 of its potential returns per unit of risk. The Embrace Change Acquisition is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 7.52 in Embrace Change Acquisition on November 2, 2024 and sell it today you would earn a total of 4.48 from holding Embrace Change Acquisition or generate 59.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 63.16% |
| Values | Daily Returns |
Diamond Hill Investment vs. Embrace Change Acquisition
Performance |
| Timeline |
| Diamond Hill Investment |
| Embrace Change Acqui |
Diamond Hill and Embrace Change Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and Embrace Change
The main advantage of trading using opposite Diamond Hill and Embrace Change positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Embrace Change 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 Embrace Change will offset losses from the drop in Embrace Change'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 |
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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