Correlation Between Diamond Hill and Bowen Acquisition

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

Diversification Opportunities for Diamond Hill and Bowen Acquisition

0.39

Correlation Coefficient

Diamond Hill  Bowen Acquisition

Weak diversification

The 3 months correlation between Diamond and Bowen is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Bowen Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowen Acquisition Corp 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 Bowen Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowen Acquisition Corp has no effect on the direction of Diamond Hill i.e., Diamond Hill and Bowen Acquisition go up and down completely randomly.

Pair Corralation between Diamond Hill and Bowen Acquisition

Given the investment horizon of 90 days Diamond Hill Investment is expected to generate 0.33 times more return on investment than Bowen Acquisition. However, Diamond Hill Investment is 3.07 times less risky than Bowen Acquisition. It trades about -0.02 of its potential returns per unit of risk. Bowen Acquisition Corp is currently generating about -0.09 per unit of risk. If you would invest  15,530  in Diamond Hill Investment on October 22, 2024 and sell it today you would lose (529.00) from holding Diamond Hill Investment or give up 3.41% of portfolio value over 90 days.

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

Diamond Hill Investment  vs.  Bowen Acquisition Corp

Diamond Hill Investment

Risk-Adjusted Performance

0 of 100

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 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.

Bowen Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bowen Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Diamond Hill and Bowen Acquisition

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

The idea behind Diamond Hill Investment and Bowen Acquisition Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.