Correlation Between Diamond Hill and Gotham Absolute
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Gotham Absolute 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 Gotham Absolute into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamond Hill Long Short and Gotham Absolute Return, you can compare the effects of market volatilities on Diamond Hill and Gotham Absolute 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 Gotham Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Gotham Absolute.
Diversification Opportunities for Diamond Hill and Gotham Absolute
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Diamond and Gotham is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Long Short and Gotham Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gotham Absolute Return 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 Long Short are associated (or correlated) with Gotham Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gotham Absolute Return has no effect on the direction of Diamond Hill i.e., Diamond Hill and Gotham Absolute go up and down completely randomly.
Pair Corralation between Diamond Hill and Gotham Absolute
Assuming the 90 days horizon Diamond Hill is expected to generate 1.6 times less return on investment than Gotham Absolute. But when comparing it to its historical volatility, Diamond Hill Long Short is 1.01 times less risky than Gotham Absolute. It trades about 0.1 of its potential returns per unit of risk. Gotham Absolute Return is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 2,379 in Gotham Absolute Return on September 4, 2024 and sell it today you would earn a total of 39.00 from holding Gotham Absolute Return or generate 1.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamond Hill Long Short vs. Gotham Absolute Return
Performance |
| Timeline |
| Diamond Hill Long |
| Gotham Absolute Return |
Diamond Hill and Gotham Absolute Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and Gotham Absolute
The main advantage of trading using opposite Diamond Hill and Gotham Absolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Gotham Absolute 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 Gotham Absolute will offset losses from the drop in Gotham Absolute's long position.| Diamond Hill vs. Gateway Fund Class | Diamond Hill vs. Aqr Managed Futures | Diamond Hill vs. Boston Partners Longshort | Diamond Hill vs. Calamos Market Neutral |
| Gotham Absolute vs. Gotham Hedged E | Gotham Absolute vs. Gotham Defensive Long | Gotham Absolute vs. Gotham Large Value | Gotham Absolute vs. Gotham Enhanced 500 |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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