Correlation Between Diamond Hill and Franklin BSP
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Franklin BSP 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 Franklin BSP 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 Franklin BSP Realty, you can compare the effects of market volatilities on Diamond Hill and Franklin BSP 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 Franklin BSP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Franklin BSP.
Diversification Opportunities for Diamond Hill and Franklin BSP
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Diamond and Franklin is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Franklin BSP Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin BSP Realty 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 Franklin BSP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin BSP Realty has no effect on the direction of Diamond Hill i.e., Diamond Hill and Franklin BSP go up and down completely randomly.
Pair Corralation between Diamond Hill and Franklin BSP
Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Franklin BSP. In addition to that, Diamond Hill is 1.0 times more volatile than Franklin BSP Realty. It trades about -0.08 of its total potential returns per unit of risk. Franklin BSP Realty is currently generating about 0.09 per unit of volatility. If you would invest 1,232 in Franklin BSP Realty on December 27, 2024 and sell it today you would earn a total of 72.00 from holding Franklin BSP Realty or generate 5.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Diamond Hill Investment vs. Franklin BSP Realty
Performance |
Timeline |
Diamond Hill Investment |
Franklin BSP Realty |
Diamond Hill and Franklin BSP Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Diamond Hill and Franklin BSP
The main advantage of trading using opposite Diamond Hill and Franklin BSP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Franklin BSP 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 Franklin BSP will offset losses from the drop in Franklin BSP's long position.Diamond Hill vs. Federated Premier Municipal | Diamond Hill vs. Blackrock Muniyield | Diamond Hill vs. NXG NextGen Infrastructure | Diamond Hill vs. Federated Investors B |
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Check out your portfolio center.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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