Correlation Between Diamond Hill and Metal Sky
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Metal Sky 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 Metal Sky 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 Metal Sky Star, you can compare the effects of market volatilities on Diamond Hill and Metal Sky 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 Metal Sky. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Metal Sky.
Diversification Opportunities for Diamond Hill and Metal Sky
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Diamond and Metal is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Metal Sky Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metal Sky Star 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 Metal Sky. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metal Sky Star has no effect on the direction of Diamond Hill i.e., Diamond Hill and Metal Sky go up and down completely randomly.
Pair Corralation between Diamond Hill and Metal Sky
Given the investment horizon of 90 days Diamond Hill Investment is expected to generate 1.81 times more return on investment than Metal Sky. However, Diamond Hill is 1.81 times more volatile than Metal Sky Star. It trades about 0.07 of its potential returns per unit of risk. Metal Sky Star is currently generating about 0.08 per unit of risk. If you would invest 15,062 in Diamond Hill Investment on September 12, 2024 and sell it today you would earn a total of 1,052 from holding Diamond Hill Investment or generate 6.98% 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. Metal Sky Star
Performance |
| Timeline |
| Diamond Hill Investment |
| Metal Sky Star |
Diamond Hill and Metal Sky Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and Metal Sky
The main advantage of trading using opposite Diamond Hill and Metal Sky positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Metal Sky 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 Metal Sky will offset losses from the drop in Metal Sky's long position.| Diamond Hill vs. Stellus Capital Investment | Diamond Hill vs. Prospect Capital | Diamond Hill vs. Gladstone Capital | Diamond Hill vs. Main Street Capital |
| Metal Sky vs. HUMANA INC | Metal Sky vs. Barloworld Ltd ADR | Metal Sky vs. Morningstar Unconstrained Allocation | Metal Sky vs. Thrivent High Yield |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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