Correlation Between Diamond Hill and Finance Of
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Finance Of 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 Finance Of 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 Finance of America, you can compare the effects of market volatilities on Diamond Hill and Finance Of 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 Finance Of. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Finance Of.
Diversification Opportunities for Diamond Hill and Finance Of
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Diamond and Finance is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Finance of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finance of America 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 Finance Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finance of America has no effect on the direction of Diamond Hill i.e., Diamond Hill and Finance Of go up and down completely randomly.
Pair Corralation between Diamond Hill and Finance Of
Given the investment horizon of 90 days Diamond Hill is expected to generate 19.13 times less return on investment than Finance Of. But when comparing it to its historical volatility, Diamond Hill Investment is 4.22 times less risky than Finance Of. It trades about 0.01 of its potential returns per unit of risk. Finance of America is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,770 in Finance of America on August 31, 2024 and sell it today you would earn a total of 174.00 from holding Finance of America or generate 9.83% 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. Finance of America
Performance |
| Timeline |
| Diamond Hill Investment |
| Finance of America |
Diamond Hill and Finance Of Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and Finance Of
The main advantage of trading using opposite Diamond Hill and Finance Of positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Finance Of 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 Finance Of will offset losses from the drop in Finance Of'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 |
| Finance Of vs. Regional Management Corp | Finance Of vs. Orix Corp Ads | Finance Of vs. FirstCash | Finance Of vs. EZCORP Inc |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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