Correlation Between Diamond Hill and United States
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and United States 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 United States 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 United States Lime, you can compare the effects of market volatilities on Diamond Hill and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and United States.
Diversification Opportunities for Diamond Hill and United States
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Diamond and United is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and United States Lime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Lime 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Lime has no effect on the direction of Diamond Hill i.e., Diamond Hill and United States go up and down completely randomly.
Pair Corralation between Diamond Hill and United States
Given the investment horizon of 90 days Diamond Hill is expected to generate 9.21 times less return on investment than United States. But when comparing it to its historical volatility, Diamond Hill Investment is 1.89 times less risky than United States. It trades about 0.07 of its potential returns per unit of risk. United States Lime is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 8,138 in United States Lime on August 23, 2024 and sell it today you would earn a total of 6,895 from holding United States Lime or generate 84.73% 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. United States Lime
Performance |
| Timeline |
| Diamond Hill Investment |
| United States Lime |
Diamond Hill and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and United States
The main advantage of trading using opposite Diamond Hill and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' 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 |
| United States vs. Smith Midland Corp | United States vs. Holcim | United States vs. Lafargeholcim Ltd ADR | United States vs. Cementos Pacasmayo SAA |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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