Correlation Between Associated Capital and Diamond Hill

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

0.32

Correlation Coefficient

Associated Capital  Diamond Hill

Weak diversification

The 3 months correlation between Associated and Diamond is 0.32. 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 generate 1.1 times more return on investment than Diamond Hill. However, Associated Capital is 1.1 times more volatile than Diamond Hill Investment. It trades about 0.0 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  3,780  in Associated Capital Group on August 4, 2024 and sell it today you would lose (180.00) from holding Associated Capital Group or give up 4.76% of portfolio value over 90 days.

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

Associated Capital Group  vs.  Diamond Hill Investment

Associated Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Capital Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Associated Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Diamond Hill Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.