Correlation Between Blackstone and Diamond Hill

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

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

Diversification Opportunities for Blackstone and Diamond Hill

0.6

Correlation Coefficient

Blackstone  Diamond Hill

Poor diversification

The 3 months correlation between Blackstone and Diamond is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Blackstone 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 Blackstone 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 Blackstone 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 Blackstone i.e., Blackstone and Diamond Hill go up and down completely randomly.

Pair Corralation between Blackstone and Diamond Hill

Allowing for the 90-day total investment horizon Blackstone Group is expected to generate 0.92 times more return on investment than Diamond Hill. However, Blackstone Group is 1.09 times less risky than Diamond Hill. It trades about 0.22 of its potential returns per unit of risk. Diamond Hill Investment is currently generating about 0.07 per unit of risk. If you would invest  15,731  in Blackstone Group on August 21, 2024 and sell it today you would earn a total of  2,570  from holding Blackstone Group or generate 16.34% return on investment over 90 days.

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

Blackstone Group  vs.  Diamond Hill Investment

Blackstone Group

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blackstone Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Blackstone showed solid returns over the last few months and may actually be approaching a breakup point.

Diamond Hill Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal forward indicators, Diamond Hill may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Blackstone and Diamond Hill

The main advantage of trading using opposite Blackstone and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackstone 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 Blackstone 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.