Correlation Between Carlyle and Diamond Hill

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

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

Diversification Opportunities for Carlyle and Diamond Hill

0.32

Correlation Coefficient

Carlyle  Diamond Hill

Weak diversification

The 3 months correlation between Carlyle and Diamond is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle 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 Carlyle 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 Carlyle 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 Carlyle i.e., Carlyle and Diamond Hill go up and down completely randomly.

Pair Corralation between Carlyle and Diamond Hill

Allowing for the 90-day total investment horizon Carlyle Group is expected to generate 1.43 times more return on investment than Diamond Hill. However, Carlyle is 1.43 times more volatile than Diamond Hill Investment. It trades about 0.1 of its potential returns per unit of risk. Diamond Hill Investment is currently generating about 0.02 per unit of risk. If you would invest  2,834  in Carlyle Group on July 4, 2024 and sell it today you would earn a total of  1,486  from holding Carlyle Group or generate 52.43% return on investment over 90 days.

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

Carlyle Group  vs.  Diamond Hill Investment

Carlyle Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Carlyle may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Diamond Hill Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady forward indicators, Diamond Hill disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlyle and Diamond Hill

The main advantage of trading using opposite Carlyle and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlyle 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 Carlyle 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.