Correlation Between Diamond Hill and Associated Capital

Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Associated Capital 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 Diamond Hill and Associated Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diamond Hill Investment and Associated Capital Group, you can compare the effects of market volatilities on Diamond Hill and Associated Capital 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 Diamond Hill with a short position of Associated Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Associated Capital.

Diversification Opportunities for Diamond Hill and Associated Capital

0.41

Correlation Coefficient

Diamond Hill  Associated Capital

Very weak diversification

The 3 months correlation between Diamond and Associated is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Associated Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Capital and Diamond Hill 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 Diamond Hill Investment are associated (or correlated) with Associated Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Capital has no effect on the direction of Diamond Hill i.e., Diamond Hill and Associated Capital go up and down completely randomly.

Pair Corralation between Diamond Hill and Associated Capital

Given the investment horizon of 90 days Diamond Hill is expected to generate 13.22 times less return on investment than Associated Capital. In addition to that, Diamond Hill is 1.03 times more volatile than Associated Capital Group. It trades about 0.01 of its total potential returns per unit of risk. Associated Capital Group is currently generating about 0.18 per unit of volatility. If you would invest  3,227  in Associated Capital Group on March 7, 2024 and sell it today you would earn a total of  167.00  from holding Associated Capital Group or generate 5.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Diamond Hill Investment  vs.  Associated Capital Group

Diamond Hill Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Hill Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Diamond Hill is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Associated Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Capital Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Associated Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Diamond Hill and Associated Capital

The main advantage of trading using opposite Diamond Hill and Associated Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Associated Capital 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 Associated Capital will offset losses from the drop in Associated Capital's long position.

The idea behind Diamond Hill Investment and Associated Capital Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.