Correlation Between Diamond Hill and Western Asset
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Western Asset 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 Western Asset 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 Western Asset Investment, you can compare the effects of market volatilities on Diamond Hill and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Western Asset.
Diversification Opportunities for Diamond Hill and Western Asset
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Diamond and Western is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Western Asset Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Investment 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Investment has no effect on the direction of Diamond Hill i.e., Diamond Hill and Western Asset go up and down completely randomly.
Pair Corralation between Diamond Hill and Western Asset
Given the investment horizon of 90 days Diamond Hill is expected to generate 1.1 times less return on investment than Western Asset. In addition to that, Diamond Hill is 2.4 times more volatile than Western Asset Investment. It trades about 0.02 of its total potential returns per unit of risk. Western Asset Investment is currently generating about 0.04 per unit of volatility. If you would invest 1,527 in Western Asset Investment on August 28, 2024 and sell it today you would earn a total of 139.00 from holding Western Asset Investment or generate 9.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
Diamond Hill Investment vs. Western Asset Investment
Performance |
| Timeline |
| Diamond Hill Investment |
| Western Asset Investment |
Diamond Hill and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and Western Asset
The main advantage of trading using opposite Diamond Hill and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Diamond Hill vs. PowerUp Acquisition Corp | Diamond Hill vs. Aurora Innovation | Diamond Hill vs. HUMANA INC | Diamond Hill vs. Aquagold International |
| Western Asset vs. Pioneer Floating Rate | Western Asset vs. The Gabelli Equity | Western Asset vs. Pioneer Municipal High | Western Asset vs. Nuveen Global High |
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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