Correlation Between Diamond Hill and Applied Finance

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

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

Diversification Opportunities for Diamond Hill and Applied Finance

0.69

Correlation Coefficient

Diamond Hill  Applied Finance

Poor diversification

The 3 months correlation between Diamond and Applied is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill All and Applied Finance Explorer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance Explorer 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 All are associated (or correlated) with Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Explorer has no effect on the direction of Diamond Hill i.e., Diamond Hill and Applied Finance go up and down completely randomly.

Pair Corralation between Diamond Hill and Applied Finance

Assuming the 90 days horizon Diamond Hill All is expected to generate 1.09 times more return on investment than Applied Finance. However, Diamond Hill is 1.09 times more volatile than Applied Finance Explorer. It trades about 0.17 of its potential returns per unit of risk. Applied Finance Explorer is currently generating about 0.07 per unit of risk. If you would invest  2,226  in Diamond Hill All on May 5, 2025 and sell it today you would earn a total of  283.00  from holding Diamond Hill All or generate 12.71% return on investment over 90 days.

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

Diamond Hill All  vs.  Applied Finance Explorer

Diamond Hill All

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill All are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Diamond Hill may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Applied Finance Explorer

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Finance Explorer are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Applied Finance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Diamond Hill and Applied Finance

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

The idea behind Diamond Hill All and Applied Finance Explorer 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 CEOs Directory module to screen CEOs from public companies around the world.