Correlation Between Diamond Hill and Investcorp Europe

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

Diversification Opportunities for Diamond Hill and Investcorp Europe

0.51

Correlation Coefficient

Diamond Hill  Investcorp Europe

Very weak diversification

The 3 months correlation between Diamond and Investcorp is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Investcorp Europe Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investcorp Europe 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 Investcorp Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investcorp Europe has no effect on the direction of Diamond Hill i.e., Diamond Hill and Investcorp Europe go up and down completely randomly.

Pair Corralation between Diamond Hill and Investcorp Europe

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Investcorp Europe. In addition to that, Diamond Hill is 6.18 times more volatile than Investcorp Europe Acquisition. It trades about -0.32 of its total potential returns per unit of risk. Investcorp Europe Acquisition is currently generating about 0.35 per unit of volatility. If you would invest  1,152  in Investcorp Europe Acquisition on September 16, 2024 and sell it today you would earn a total of  12.00  from holding Investcorp Europe Acquisition or generate 1.04% return on investment over 90 days.

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

Diamond Hill Investment  vs.  Investcorp Europe Acquisition

Diamond Hill Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 3 (%) 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.

Investcorp Europe

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Investcorp Europe Acquisition are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental indicators, Investcorp Europe may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Diamond Hill and Investcorp Europe

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

The idea behind Diamond Hill Investment and Investcorp Europe 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.