Correlation Between Diamond Hill and Cannae Holdings

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

Diversification Opportunities for Diamond Hill and Cannae Holdings

0.89

Correlation Coefficient

Diamond Hill  Cannae Holdings

Very poor diversification

The 3 months correlation between Diamond and Cannae is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Cannae Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cannae Holdings 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 Cannae Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cannae Holdings has no effect on the direction of Diamond Hill i.e., Diamond Hill and Cannae Holdings go up and down completely randomly.

Pair Corralation between Diamond Hill and Cannae Holdings

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Cannae Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Hill Investment is 1.12 times less risky than Cannae Holdings. The stock trades about -0.2 of its potential returns per unit of risk. The Cannae Holdings is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,153  in Cannae Holdings on December 1, 2024 and sell it today you would lose (149.00) from holding Cannae Holdings or give up 6.92% of portfolio value over 90 days.

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

Diamond Hill Investment  vs.  Cannae Holdings

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 unfluctuating performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Cannae Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cannae Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Diamond Hill and Cannae Holdings

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

The idea behind Diamond Hill Investment and Cannae Holdings 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.