Correlation Between Diamond Hill and Golden Star

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

Diversification Opportunities for Diamond Hill and Golden Star

0.11

Correlation Coefficient

Diamond Hill  Golden Star

Average diversification

The 3 months correlation between Diamond and Golden is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Golden Star Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Star 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 Golden Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Star Acquisition has no effect on the direction of Diamond Hill i.e., Diamond Hill and Golden Star go up and down completely randomly.

Pair Corralation between Diamond Hill and Golden Star

Given the investment horizon of 90 days Diamond Hill is expected to generate 1.15 times less return on investment than Golden Star. But when comparing it to its historical volatility, Diamond Hill Investment is 1.27 times less risky than Golden Star. It trades about 0.03 of its potential returns per unit of risk. Golden Star Acquisition is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,123  in Golden Star Acquisition on September 17, 2024 and sell it today you would earn a total of  26.00  from holding Golden Star Acquisition or generate 2.32% return on investment over 90 days.

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

Diamond Hill Investment  vs.  Golden Star Acquisition

Diamond Hill Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 2 (%) 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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Golden Star Acquisition

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Star Acquisition are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Golden Star is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Diamond Hill and Golden Star

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

The idea behind Diamond Hill Investment and Golden Star Acquisition 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.