Correlation Between Diamond Hill and SLM Corp
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and SLM Corp 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 SLM Corp 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 SLM Corp, you can compare the effects of market volatilities on Diamond Hill and SLM Corp 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 SLM Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and SLM Corp.
Diversification Opportunities for Diamond Hill and SLM Corp
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Diamond and SLM is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and SLM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of Diamond Hill i.e., Diamond Hill and SLM Corp go up and down completely randomly.
Pair Corralation between Diamond Hill and SLM Corp
Given the investment horizon of 90 days Diamond Hill Investment is expected to generate 0.65 times more return on investment than SLM Corp. However, Diamond Hill Investment is 1.53 times less risky than SLM Corp. It trades about 0.24 of its potential returns per unit of risk. SLM Corp is currently generating about 0.14 per unit of risk. If you would invest 15,255 in Diamond Hill Investment on August 24, 2024 and sell it today you would earn a total of 1,710 from holding Diamond Hill Investment or generate 11.21% 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. SLM Corp
Performance |
| Timeline |
| Diamond Hill Investment |
| SLM Corp |
Diamond Hill and SLM Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and SLM Corp
The main advantage of trading using opposite Diamond Hill and SLM Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, SLM Corp 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 SLM Corp will offset losses from the drop in SLM Corp'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 |
| SLM Corp vs. Small Cap Core | SLM Corp vs. Morningstar Unconstrained Allocation | SLM Corp vs. Mutual Of America | SLM Corp vs. Ep Emerging Markets |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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