Correlation Between Diamond Hill and Hudson Acquisition

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

Diversification Opportunities for Diamond Hill and Hudson Acquisition

0.0

Correlation Coefficient

Diamond Hill  Hudson Acquisition

Pay attention - limited upside

The 3 months correlation between Diamond and Hudson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Hudson Acquisition I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson 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 Hudson Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Acquisition has no effect on the direction of Diamond Hill i.e., Diamond Hill and Hudson Acquisition go up and down completely randomly.

Pair Corralation between Diamond Hill and Hudson Acquisition

Given the investment horizon of 90 days Diamond Hill is expected to generate 18.14 times less return on investment than Hudson Acquisition. But when comparing it to its historical volatility, Diamond Hill Investment is 2.61 times less risky than Hudson Acquisition. It trades about 0.0 of its potential returns per unit of risk. Hudson Acquisition I is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,061  in Hudson Acquisition I on October 21, 2024 and sell it today you would earn a total of  195.00  from holding Hudson Acquisition I or generate 18.38% return on investment over 90 days.

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

Diamond Hill Investment  vs.  Hudson Acquisition I

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.

Hudson Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hudson Acquisition I has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Hudson Acquisition is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Diamond Hill and Hudson Acquisition

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

The idea behind Diamond Hill Investment and Hudson Acquisition I 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..