Correlation Between Diamond Hill and State Street
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and State Street 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 State Street 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 State Street Corp, you can compare the effects of market volatilities on Diamond Hill and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and State Street.
Diversification Opportunities for Diamond Hill and State Street
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Diamond and State is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and State Street Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Corp has no effect on the direction of Diamond Hill i.e., Diamond Hill and State Street go up and down completely randomly.
Pair Corralation between Diamond Hill and State Street
Given the investment horizon of 90 days Diamond Hill is expected to generate 4.59 times less return on investment than State Street. But when comparing it to its historical volatility, Diamond Hill Investment is 1.09 times less risky than State Street. It trades about 0.01 of its potential returns per unit of risk. State Street Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6,924 in State Street Corp on August 27, 2024 and sell it today you would earn a total of 2,826 from holding State Street Corp or generate 40.81% 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. State Street Corp
Performance |
| Timeline |
| Diamond Hill Investment |
| State Street Corp |
Diamond Hill and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and State Street
The main advantage of trading using opposite Diamond Hill and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street'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 |
| State Street vs. Northern Trust | State Street vs. Franklin Resources | State Street vs. Invesco Plc | State Street vs. T Rowe Price |
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 CEOs Directory module to screen CEOs from public companies around the world.
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