Correlation Between Diamond Hill and Winmark

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

Diversification Opportunities for Diamond Hill and Winmark

0.4

Correlation Coefficient

Diamond Hill  Winmark

Very weak diversification

The 3 months correlation between Diamond and Winmark is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Winmark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winmark 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 Winmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winmark has no effect on the direction of Diamond Hill i.e., Diamond Hill and Winmark go up and down completely randomly.

Pair Corralation between Diamond Hill and Winmark

Given the investment horizon of 90 days Diamond Hill Investment is expected to generate 0.77 times more return on investment than Winmark. However, Diamond Hill Investment is 1.3 times less risky than Winmark. It trades about -0.14 of its potential returns per unit of risk. Winmark is currently generating about -0.13 per unit of risk. If you would invest  14,951  in Diamond Hill Investment on January 15, 2025 and sell it today you would lose (1,772) from holding Diamond Hill Investment or give up 11.85% of portfolio value over 90 days.

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

Diamond Hill Investment  vs.  Winmark

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.

Winmark

Risk-Adjusted Performance

Very Weak

Over the last 90 days Winmark 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 basic indicators remain somewhat strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Diamond Hill and Winmark

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

The idea behind Diamond Hill Investment and Winmark 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.