Correlation Between Stepstone and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both Stepstone 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 Stepstone and Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepstone Group and Diamond Hill Investment, you can compare the effects of market volatilities on Stepstone 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 Stepstone with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and Diamond Hill.
Diversification Opportunities for Stepstone and Diamond Hill
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stepstone and Diamond is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group 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 Stepstone 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 Stepstone Group 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 Stepstone i.e., Stepstone and Diamond Hill go up and down completely randomly.
Pair Corralation between Stepstone and Diamond Hill
Given the investment horizon of 90 days Stepstone Group is expected to generate 1.4 times more return on investment than Diamond Hill. However, Stepstone is 1.4 times more volatile than Diamond Hill Investment. It trades about 0.1 of its potential returns per unit of risk. Diamond Hill Investment is currently generating about 0.01 per unit of risk. If you would invest 2,679 in Stepstone Group on August 27, 2024 and sell it today you would earn a total of 4,026 from holding Stepstone Group or generate 150.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepstone Group vs. Diamond Hill Investment
Performance |
| Timeline |
| Stepstone Group |
| Diamond Hill Investment |
Stepstone and Diamond Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepstone and Diamond Hill
The main advantage of trading using opposite Stepstone and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone 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.| Stepstone vs. Munivest Fund | Stepstone vs. Blackrock Muniyield Quality | Stepstone vs. Federated Investors B | Stepstone vs. Federated Premier Municipal |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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