Correlation Between Diamond Hill and Hennessy
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Hennessy 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 Hennessy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamond Hill Small and Hennessy Bp Energy, you can compare the effects of market volatilities on Diamond Hill and Hennessy 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 Hennessy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Hennessy.
Diversification Opportunities for Diamond Hill and Hennessy
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Diamond and Hennessy is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Small and Hennessy Bp Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Bp Energy 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 Small are associated (or correlated) with Hennessy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Bp Energy has no effect on the direction of Diamond Hill i.e., Diamond Hill and Hennessy go up and down completely randomly.
Pair Corralation between Diamond Hill and Hennessy
Assuming the 90 days horizon Diamond Hill Small is expected to generate 0.96 times more return on investment than Hennessy. However, Diamond Hill Small is 1.05 times less risky than Hennessy. It trades about 0.08 of its potential returns per unit of risk. Hennessy Bp Energy is currently generating about 0.05 per unit of risk. If you would invest 2,397 in Diamond Hill Small on November 4, 2024 and sell it today you would earn a total of 33.00 from holding Diamond Hill Small or generate 1.38% 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 Small vs. Hennessy Bp Energy
Performance |
| Timeline |
| Diamond Hill Small |
| Hennessy Bp Energy |
Diamond Hill and Hennessy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and Hennessy
The main advantage of trading using opposite Diamond Hill and Hennessy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Hennessy 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 Hennessy will offset losses from the drop in Hennessy's long position.| Diamond Hill vs. American Century Etf | Diamond Hill vs. Mid Cap Growth Profund | Diamond Hill vs. Small Cap Value | Diamond Hill vs. Applied Finance Explorer |
| Hennessy vs. World Energy Fund | Hennessy vs. Ivy Energy Fund | Hennessy vs. Blackrock All Cap Energy | Hennessy vs. Energy Fund Class |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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