Correlation Between Diamond Hill and Moelis

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

Diversification Opportunities for Diamond Hill and Moelis

0.84

Correlation Coefficient

Diamond Hill  Moelis

Very poor diversification

The 3 months correlation between Diamond and Moelis is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Moelis Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moelis 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 Moelis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moelis has no effect on the direction of Diamond Hill i.e., Diamond Hill and Moelis go up and down completely randomly.

Pair Corralation between Diamond Hill and Moelis

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Moelis. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Hill Investment is 1.33 times less risky than Moelis. The stock trades about 0.0 of its potential returns per unit of risk. The Moelis Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,243  in Moelis Co on August 6, 2024 and sell it today you would earn a total of  2,450  from holding Moelis Co or generate 57.74% return on investment over 90 days.

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

Diamond Hill Investment  vs.  Moelis Co

Diamond Hill Investment

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 4 (%) 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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Moelis

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Moelis Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Moelis may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Diamond Hill and Moelis

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

The idea behind Diamond Hill Investment and Moelis Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.