Correlation Between Diamond Hill and Annaly Capital

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

Diversification Opportunities for Diamond Hill and Annaly Capital

0.16

Correlation Coefficient

Diamond Hill  Annaly Capital

Average diversification

The 3 months correlation between Diamond and Annaly is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Annaly Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Annaly Capital Management 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 Annaly Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Annaly Capital Management has no effect on the direction of Diamond Hill i.e., Diamond Hill and Annaly Capital go up and down completely randomly.

Pair Corralation between Diamond Hill and Annaly Capital

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Annaly Capital. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Hill Investment is 1.32 times less risky than Annaly Capital. The stock trades about -0.09 of its potential returns per unit of risk. The Annaly Capital Management is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,753  in Annaly Capital Management on January 10, 2025 and sell it today you would lose (23.00) from holding Annaly Capital Management or give up 1.31% of portfolio value over 90 days.

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

Diamond Hill Investment  vs.  Annaly Capital Management

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 latest unfluctuating performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Annaly Capital Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Annaly Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Annaly Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Diamond Hill and Annaly Capital

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

The idea behind Diamond Hill Investment and Annaly Capital Management 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.