Correlation Between State Street and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both State Street 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 State Street and Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Premier and Diamond Hill E, you can compare the effects of market volatilities on State Street 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 State Street with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Diamond Hill.
Diversification Opportunities for State Street and Diamond Hill
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between State and Diamond is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding State Street Premier and Diamond Hill E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill E and State Street 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 State Street Premier 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 E has no effect on the direction of State Street i.e., State Street and Diamond Hill go up and down completely randomly.
Pair Corralation between State Street and Diamond Hill
Assuming the 90 days horizon State Street Premier is expected to generate 2.87 times more return on investment than Diamond Hill. However, State Street is 2.87 times more volatile than Diamond Hill E. It trades about 0.1 of its potential returns per unit of risk. Diamond Hill E is currently generating about 0.06 per unit of risk. If you would invest 9,613 in State Street Premier on August 31, 2024 and sell it today you would earn a total of 4,750 from holding State Street Premier or generate 49.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
State Street Premier vs. Diamond Hill E
Performance |
| Timeline |
| State Street Premier |
| Diamond Hill E |
State Street and Diamond Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Diamond Hill
The main advantage of trading using opposite State Street and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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.| State Street vs. Vanguard Total Stock | State Street vs. Vanguard 500 Index | State Street vs. Vanguard Total Stock | State Street vs. Vanguard Total Stock |
| Diamond Hill vs. Qs Small Capitalization | Diamond Hill vs. Tax Managed Mid Small | Diamond Hill vs. Us Small Cap | Diamond Hill vs. Fisher Small Cap |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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