Correlation Between Diamond Hill and Goldenstone Acquisition

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

Diversification Opportunities for Diamond Hill and Goldenstone Acquisition

-0.36

Correlation Coefficient

Diamond Hill  Goldenstone Acquisition

Very good diversification

The 3 months correlation between Diamond and Goldenstone is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Goldenstone Acquisition Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldenstone Acquisition 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 Goldenstone Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldenstone Acquisition has no effect on the direction of Diamond Hill i.e., Diamond Hill and Goldenstone Acquisition go up and down completely randomly.

Pair Corralation between Diamond Hill and Goldenstone Acquisition

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Goldenstone Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Hill Investment is 26.71 times less risky than Goldenstone Acquisition. The stock trades about -0.24 of its potential returns per unit of risk. The Goldenstone Acquisition Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.06  in Goldenstone Acquisition Limited on October 6, 2024 and sell it today you would lose (0.55) from holding Goldenstone Acquisition Limited or give up 26.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	40.0%
Values	Daily Returns

Diamond Hill Investment  vs.  Goldenstone Acquisition Limite

Diamond Hill Investment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Goldenstone Acquisition

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Goldenstone Acquisition Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady basic indicators, Goldenstone Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Hill and Goldenstone Acquisition

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

The idea behind Diamond Hill Investment and Goldenstone Acquisition Limited 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.