Correlation Between Diamond Hill and Western Union
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Western Union 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 Western Union 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 Western Union Co, you can compare the effects of market volatilities on Diamond Hill and Western Union 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 Western Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Western Union.
Diversification Opportunities for Diamond Hill and Western Union
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Diamond and Western is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Western Union Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union 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 Western Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Union has no effect on the direction of Diamond Hill i.e., Diamond Hill and Western Union go up and down completely randomly.
Pair Corralation between Diamond Hill and Western Union
Given the investment horizon of 90 days Diamond Hill Investment is expected to generate 1.67 times more return on investment than Western Union. However, Diamond Hill is 1.67 times more volatile than Western Union Co. It trades about 0.27 of its potential returns per unit of risk. Western Union Co is currently generating about -0.03 per unit of risk. If you would invest 15,207 in Diamond Hill Investment on August 26, 2024 and sell it today you would earn a total of 1,849 from holding Diamond Hill Investment or generate 12.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamond Hill Investment vs. Western Union Co
Performance |
| Timeline |
| Diamond Hill Investment |
| Western Union |
Diamond Hill and Western Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and Western Union
The main advantage of trading using opposite Diamond Hill and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Western Union 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 Western Union will offset losses from the drop in Western Union'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 |
| Western Union vs. American Express | Western Union vs. Morningstar Unconstrained Allocation | Western Union vs. Sitka Gold Corp | Western Union vs. MSCI ACWI exAUCONSUMER |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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