Correlation Between Diamond Hill and Prospect Capital
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Prospect Capital 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 Prospect Capital 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 Prospect Capital, you can compare the effects of market volatilities on Diamond Hill and Prospect Capital 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 Prospect Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Prospect Capital.
Diversification Opportunities for Diamond Hill and Prospect Capital
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Diamond and Prospect is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Prospect Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospect Capital 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 Prospect Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospect Capital has no effect on the direction of Diamond Hill i.e., Diamond Hill and Prospect Capital go up and down completely randomly.
Pair Corralation between Diamond Hill and Prospect Capital
Given the investment horizon of 90 days Diamond Hill Investment is expected to generate 0.57 times more return on investment than Prospect Capital. However, Diamond Hill Investment is 1.76 times less risky than Prospect Capital. It trades about 0.22 of its potential returns per unit of risk. Prospect Capital is currently generating about -0.1 per unit of risk. If you would invest 15,541 in Diamond Hill Investment on August 27, 2024 and sell it today you would earn a total of 1,515 from holding Diamond Hill Investment or generate 9.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamond Hill Investment vs. Prospect Capital
Performance |
| Timeline |
| Diamond Hill Investment |
| Prospect Capital |
Diamond Hill and Prospect Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and Prospect Capital
The main advantage of trading using opposite Diamond Hill and Prospect Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Prospect Capital 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 Prospect Capital will offset losses from the drop in Prospect Capital'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 |
| Prospect Capital vs. Gladstone Capital | Prospect Capital vs. Horizon Technology Finance | Prospect Capital vs. Gladstone Investment | Prospect Capital vs. Stellus Capital Investment |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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