Correlation Between Associated Capital and Diamond Hill

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Can any of the company-specific risk be diversified away by investing in both Associated Capital 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 Associated Capital and Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated Capital Group and Diamond Hill Investment, you can compare the effects of market volatilities on Associated Capital 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 Associated Capital with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Capital and Diamond Hill.

Diversification Opportunities for Associated Capital and Diamond Hill

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Associated and Diamond is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Associated Capital 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 Associated Capital 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 Associated Capital 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 Associated Capital i.e., Associated Capital and Diamond Hill go up and down completely randomly.

Pair Corralation between Associated Capital and Diamond Hill

Allowing for the 90-day total investment horizon Associated Capital Group is expected to under-perform the Diamond Hill. But the stock apears to be less risky and, when comparing its historical volatility, Associated Capital Group is 1.13 times less risky than Diamond Hill. The stock trades about -0.08 of its potential returns per unit of risk. The Diamond Hill Investment is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  14,527  in Diamond Hill Investment on December 29, 2023 and sell it today you would earn a total of  775.00  from holding Diamond Hill Investment or generate 5.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Associated Capital Group  vs.  Diamond Hill Investment

 Performance 
       Timeline  
Associated Capital 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Associated Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Diamond Hill Investment 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Associated Capital and Diamond Hill Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Associated Capital and Diamond Hill

The main advantage of trading using opposite Associated Capital and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated Capital 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.
The idea behind Associated Capital Group and Diamond Hill Investment 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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