Correlation Between Diamond Hill and GCM Grosvenor

Can any of the company-specific risk be diversified away by investing in both Diamond Hill and GCM Grosvenor 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 GCM Grosvenor 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 GCM Grosvenor, you can compare the effects of market volatilities on Diamond Hill and GCM Grosvenor 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 GCM Grosvenor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and GCM Grosvenor.

Diversification Opportunities for Diamond Hill and GCM Grosvenor

-0.23

Correlation Coefficient

Diamond Hill  GCM Grosvenor

Very good diversification

The 3 months correlation between Diamond and GCM is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and GCM Grosvenor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCM Grosvenor 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 GCM Grosvenor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCM Grosvenor has no effect on the direction of Diamond Hill i.e., Diamond Hill and GCM Grosvenor go up and down completely randomly.

Pair Corralation between Diamond Hill and GCM Grosvenor

Given the investment horizon of 90 days Diamond Hill Investment is expected to generate 0.13 times more return on investment than GCM Grosvenor. However, Diamond Hill Investment is 7.52 times less risky than GCM Grosvenor. It trades about -0.25 of its potential returns per unit of risk. GCM Grosvenor is currently generating about -0.09 per unit of risk. If you would invest  14,734  in Diamond Hill Investment on January 5, 2025 and sell it today you would lose (1,346) from holding Diamond Hill Investment or give up 9.14% of portfolio value over 90 days.

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

Diamond Hill Investment  vs.  GCM Grosvenor

Diamond Hill Investment

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

GCM Grosvenor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GCM Grosvenor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, GCM Grosvenor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Hill and GCM Grosvenor

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

The idea behind Diamond Hill Investment and GCM Grosvenor 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.