Correlation Between Diamond Hill and SWK Holdings
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and SWK Holdings 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 SWK Holdings 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 SWK Holdings, you can compare the effects of market volatilities on Diamond Hill and SWK Holdings 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 SWK Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and SWK Holdings.
Diversification Opportunities for Diamond Hill and SWK Holdings
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Diamond and SWK is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and SWK Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWK Holdings 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 SWK Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWK Holdings has no effect on the direction of Diamond Hill i.e., Diamond Hill and SWK Holdings go up and down completely randomly.
Pair Corralation between Diamond Hill and SWK Holdings
Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the SWK Holdings. In addition to that, Diamond Hill is 3.14 times more volatile than SWK Holdings. It trades about -0.27 of its total potential returns per unit of risk. SWK Holdings is currently generating about 0.02 per unit of volatility. If you would invest 2,557 in SWK Holdings on September 12, 2024 and sell it today you would earn a total of 3.00 from holding SWK Holdings or generate 0.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamond Hill Investment vs. SWK Holdings
Performance |
| Timeline |
| Diamond Hill Investment |
| SWK Holdings |
Diamond Hill and SWK Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and SWK Holdings
The main advantage of trading using opposite Diamond Hill and SWK Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, SWK Holdings 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 SWK Holdings will offset losses from the drop in SWK Holdings' long position.| Diamond Hill vs. Gladstone Investment | Diamond Hill vs. Stellus Capital Investment | Diamond Hill vs. Prospect Capital | Diamond Hill vs. Gladstone Capital |
| SWK Holdings vs. NETGEAR | SWK Holdings vs. Volaris | SWK Holdings vs. Iridium Communications | SWK Holdings vs. Reservoir Media |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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