Correlation Between Erie Indemnity and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both Erie Indemnity 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 Erie Indemnity and Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Erie Indemnity and Diamond Hill Investment, you can compare the effects of market volatilities on Erie Indemnity 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 Erie Indemnity with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erie Indemnity and Diamond Hill.
Diversification Opportunities for Erie Indemnity and Diamond Hill
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Erie and Diamond is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Erie Indemnity and Diamond Hill Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Investment and Erie Indemnity 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 Erie Indemnity 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 Investment has no effect on the direction of Erie Indemnity i.e., Erie Indemnity and Diamond Hill go up and down completely randomly.
Pair Corralation between Erie Indemnity and Diamond Hill
Given the investment horizon of 90 days Erie Indemnity is expected to under-perform the Diamond Hill. In addition to that, Erie Indemnity is 1.1 times more volatile than Diamond Hill Investment. It trades about -0.04 of its total potential returns per unit of risk. Diamond Hill Investment is currently generating about 0.18 per unit of volatility. If you would invest 15,367 in Diamond Hill Investment on August 31, 2024 and sell it today you would earn a total of 1,260 from holding Diamond Hill Investment or generate 8.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Erie Indemnity vs. Diamond Hill Investment
Performance |
| Timeline |
| Erie Indemnity |
| Diamond Hill Investment |
Erie Indemnity and Diamond Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erie Indemnity and Diamond Hill
The main advantage of trading using opposite Erie Indemnity and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erie Indemnity 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.| Erie Indemnity vs. CorVel Corp | Erie Indemnity vs. Huize Holding | Erie Indemnity vs. Crawford Company | Erie Indemnity vs. eHealth |
| Diamond Hill vs. Federated Premier Municipal | Diamond Hill vs. Blackrock Muniyield | Diamond Hill vs. NXG NextGen Infrastructure | Diamond Hill vs. Federated Investors B |
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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