Correlation Between Diamond Hill and Shelton Emerging

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

By analyzing existing cross correlation between Diamond Hill Small and Shelton Emerging Markets, you can compare the effects of market volatilities on Diamond Hill and Shelton Emerging 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 Shelton Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Shelton Emerging.

Diversification Opportunities for Diamond Hill and Shelton Emerging

-0.33

Correlation Coefficient

Diamond Hill  Shelton Emerging

Very good diversification

The 3 months correlation between Diamond and Shelton is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Small and Shelton Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shelton Emerging Markets 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 Small are associated (or correlated) with Shelton Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shelton Emerging Markets has no effect on the direction of Diamond Hill i.e., Diamond Hill and Shelton Emerging go up and down completely randomly.

Pair Corralation between Diamond Hill and Shelton Emerging

Assuming the 90 days horizon Diamond Hill Small is expected to generate 1.7 times more return on investment than Shelton Emerging. However, Diamond Hill is 1.7 times more volatile than Shelton Emerging Markets. It trades about 0.0 of its potential returns per unit of risk. Shelton Emerging Markets is currently generating about -0.01 per unit of risk. If you would invest  2,759  in Diamond Hill Small on September 14, 2024 and sell it today you would lose (108.00) from holding Diamond Hill Small or give up 3.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

Diamond Hill Small  vs.  Shelton Emerging Markets

Diamond Hill Small

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Diamond Hill Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Diamond Hill is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shelton Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shelton Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Shelton Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Diamond Hill and Shelton Emerging

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

The idea behind Diamond Hill Small and Shelton Emerging Markets 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.