Correlation Between Diamond Hill and Focus Impact

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

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

Diversification Opportunities for Diamond Hill and Focus Impact

-0.09

Correlation Coefficient

Diamond Hill  Focus Impact

Good diversification

The 3 months correlation between Diamond and Focus is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Focus Impact Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Impact Acquisition 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 Investment are associated (or correlated) with Focus Impact. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Impact Acquisition has no effect on the direction of Diamond Hill i.e., Diamond Hill and Focus Impact go up and down completely randomly.

Pair Corralation between Diamond Hill and Focus Impact

Given the investment horizon of 90 days Diamond Hill is expected to generate 1.04 times less return on investment than Focus Impact. In addition to that, Diamond Hill is 1.11 times more volatile than Focus Impact Acquisition. It trades about 0.02 of its total potential returns per unit of risk. Focus Impact Acquisition is currently generating about 0.03 per unit of volatility. If you would invest  1,083  in Focus Impact Acquisition on July 4, 2024 and sell it today you would earn a total of  70.00  from holding Focus Impact Acquisition or generate 6.46% return on investment over 90 days.

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

Diamond Hill Investment  vs.  Focus Impact Acquisition

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.

Focus Impact Acquisition

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Impact Acquisition are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Focus Impact is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Diamond Hill and Focus Impact

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

The idea behind Diamond Hill Investment and Focus Impact Acquisition 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.