Correlation Between Angel Oak and Diamond Hill

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

By analyzing existing cross correlation between Angel Oak Ultrashort and Diamond Hill Small, you can compare the effects of market volatilities on Angel Oak and Diamond Hill 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 Angel Oak with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Angel Oak and Diamond Hill.

Diversification Opportunities for Angel Oak and Diamond Hill

0.78

Correlation Coefficient

Angel Oak  Diamond Hill

Poor diversification

The 3 months correlation between Angel and Diamond is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Angel Oak Ultrashort and Diamond Hill Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Small and Angel Oak 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 Angel Oak Ultrashort are associated (or correlated) with Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Small has no effect on the direction of Angel Oak i.e., Angel Oak and Diamond Hill go up and down completely randomly.

Pair Corralation between Angel Oak and Diamond Hill

Assuming the 90 days horizon Angel Oak Ultrashort is expected to generate 0.02 times more return on investment than Diamond Hill. However, Angel Oak Ultrashort is 57.43 times less risky than Diamond Hill. It trades about 0.13 of its potential returns per unit of risk. Diamond Hill Small is currently generating about -0.18 per unit of risk. If you would invest  982.00  in Angel Oak Ultrashort on September 13, 2024 and sell it today you would earn a total of  1.00  from holding Angel Oak Ultrashort or generate 0.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Angel Oak Ultrashort  vs.  Diamond Hill Small

Angel Oak Ultrashort

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak Ultrashort are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Angel Oak is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Diamond Hill Small

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Small are ranked lower than 10 (%) 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 January 2025.

Pair Trading with Angel Oak and Diamond Hill

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

The idea behind Angel Oak Ultrashort and Diamond Hill Small 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.