Correlation Between Western Asset and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Global and Diamond Hill Investment, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Diamond Hill.
Diversification Opportunities for Western Asset and Diamond Hill
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and Diamond is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global 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 Western Asset 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 Western Asset Global 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 Western Asset i.e., Western Asset and Diamond Hill go up and down completely randomly.
Pair Corralation between Western Asset and Diamond Hill
Considering the 90-day investment horizon Western Asset Global is expected to generate 0.56 times more return on investment than Diamond Hill. However, Western Asset Global is 1.77 times less risky than Diamond Hill. It trades about -0.11 of its potential returns per unit of risk. Diamond Hill Investment is currently generating about -0.27 per unit of risk. If you would invest 1,186 in Western Asset Global on September 12, 2024 and sell it today you would lose (16.00) from holding Western Asset Global or give up 1.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Global vs. Diamond Hill Investment
Performance |
| Timeline |
| Western Asset Global |
| Diamond Hill Investment |
Western Asset and Diamond Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Diamond Hill
The main advantage of trading using opposite Western Asset and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. Western Asset High | Western Asset vs. Western Asset Global | Western Asset vs. European Equity Closed | Western Asset vs. Doubleline Opportunistic Credit |
| Diamond Hill vs. Stellus Capital Investment | Diamond Hill vs. Prospect Capital | Diamond Hill vs. Gladstone Capital | Diamond Hill vs. Main Street Capital |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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