Correlation Between Edgewood Growth and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both Edgewood Growth and Diamond Hill 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 Edgewood Growth and Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edgewood Growth Fund and Diamond Hill Long Short, you can compare the effects of market volatilities on Edgewood Growth and Diamond Hill 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 Edgewood Growth with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edgewood Growth and Diamond Hill.
Diversification Opportunities for Edgewood Growth and Diamond Hill
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Edgewood and Diamond is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Edgewood Growth Fund and Diamond Hill Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Long and Edgewood Growth 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 Edgewood Growth Fund are associated (or correlated) with Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Long has no effect on the direction of Edgewood Growth i.e., Edgewood Growth and Diamond Hill go up and down completely randomly.
Pair Corralation between Edgewood Growth and Diamond Hill
Assuming the 90 days horizon Edgewood Growth Fund is expected to generate 1.8 times more return on investment than Diamond Hill. However, Edgewood Growth is 1.8 times more volatile than Diamond Hill Long Short. It trades about 0.35 of its potential returns per unit of risk. Diamond Hill Long Short is currently generating about 0.06 per unit of risk. If you would invest 4,674 in Edgewood Growth Fund on September 1, 2024 and sell it today you would earn a total of 310.00 from holding Edgewood Growth Fund or generate 6.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edgewood Growth Fund vs. Diamond Hill Long Short
Performance |
| Timeline |
| Edgewood Growth |
| Diamond Hill Long |
Edgewood Growth and Diamond Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edgewood Growth and Diamond Hill
The main advantage of trading using opposite Edgewood Growth and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edgewood Growth position performs unexpectedly, Diamond Hill 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 Diamond Hill will offset losses from the drop in Diamond Hill's long position.| Edgewood Growth vs. Edgewood Growth Fund | Edgewood Growth vs. Polen Growth Fund | Edgewood Growth vs. Doubleline Shiller Enhanced | Edgewood Growth vs. Parnassus Endeavor Fund |
| Diamond Hill vs. Gateway Fund Class | Diamond Hill vs. Aqr Managed Futures | Diamond Hill vs. Boston Partners Longshort | Diamond Hill vs. Calamos Market Neutral |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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