Correlation Between Diamond Hill and Sprott Focus
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Sprott Focus 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 Sprott Focus 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 Sprott Focus Trust, you can compare the effects of market volatilities on Diamond Hill and Sprott Focus 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 Sprott Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Sprott Focus.
Diversification Opportunities for Diamond Hill and Sprott Focus
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Diamond and Sprott is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Sprott Focus Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Focus Trust 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 Sprott Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Focus Trust has no effect on the direction of Diamond Hill i.e., Diamond Hill and Sprott Focus go up and down completely randomly.
Pair Corralation between Diamond Hill and Sprott Focus
Given the investment horizon of 90 days Diamond Hill Investment is expected to generate 1.55 times more return on investment than Sprott Focus. However, Diamond Hill is 1.55 times more volatile than Sprott Focus Trust. It trades about 0.03 of its potential returns per unit of risk. Sprott Focus Trust is currently generating about 0.04 per unit of risk. If you would invest 14,772 in Diamond Hill Investment on August 26, 2024 and sell it today you would earn a total of 2,284 from holding Diamond Hill Investment or generate 15.46% 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. Sprott Focus Trust
Performance |
| Timeline |
| Diamond Hill Investment |
| Sprott Focus Trust |
Diamond Hill and Sprott Focus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and Sprott Focus
The main advantage of trading using opposite Diamond Hill and Sprott Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Sprott Focus 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 Sprott Focus will offset losses from the drop in Sprott Focus' 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 |
| Sprott Focus vs. PowerUp Acquisition Corp | Sprott Focus vs. Aurora Innovation | Sprott Focus vs. HUMANA INC | Sprott Focus vs. Aquagold International |
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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