Correlation Between Mid Cap and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both Mid Cap 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 Mid Cap and Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Value and Diamond Hill Small Mid, you can compare the effects of market volatilities on Mid Cap 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 Mid Cap with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Diamond Hill.
Diversification Opportunities for Mid Cap and Diamond Hill
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mid and Diamond is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding MID CAP VALUE and DIAMOND HILL SMALL-MID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Small-mid and Mid Cap 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 Mid Cap Value 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 Small-mid has no effect on the direction of Mid Cap i.e., Mid Cap and Diamond Hill go up and down completely randomly.
Pair Corralation between Mid Cap and Diamond Hill
Assuming the 90 days horizon Mid Cap is expected to generate 1.27 times less return on investment than Diamond Hill. But when comparing it to its historical volatility, Mid Cap Value is 1.06 times less risky than Diamond Hill. It trades about 0.28 of its potential returns per unit of risk. Diamond Hill Small Mid is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 2,585 in Diamond Hill Small Mid on December 29, 2023 and sell it today you would earn a total of 129.00 from holding Diamond Hill Small Mid or generate 4.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 95.65% |
Values | Daily Returns |
MID CAP VALUE vs. DIAMOND HILL SMALL-MID
Performance |
Timeline |
Mid Cap Value |
Diamond Hill Small-mid |
Mid Cap and Diamond Hill Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Mid Cap and Diamond Hill
The main advantage of trading using opposite Mid Cap and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap 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.Mid Cap vs. USCF Gold Strategy | Mid Cap vs. Equity Growth Fund | Mid Cap vs. Income Growth Fund | Mid Cap vs. Diversified Bond Fund |
Diamond Hill vs. USCF Gold Strategy | Diamond Hill vs. Diamond Hill Large | Diamond Hill vs. Diamond Hill Short | Diamond Hill vs. Diamond Hill Short |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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