Correlation Between Diamond Hill and AG Mortgage

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

Diversification Opportunities for Diamond Hill and AG Mortgage

-0.58

Correlation Coefficient

Diamond Hill  AG Mortgage

Excellent diversification

The 3 months correlation between Diamond and MITT is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and AG Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AG Mortgage Investment 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 AG Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AG Mortgage Investment has no effect on the direction of Diamond Hill i.e., Diamond Hill and AG Mortgage go up and down completely randomly.

Pair Corralation between Diamond Hill and AG Mortgage

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the AG Mortgage. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Hill Investment is 1.22 times less risky than AG Mortgage. The stock trades about -0.22 of its potential returns per unit of risk. The AG Mortgage Investment is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  679.00  in AG Mortgage Investment on October 10, 2024 and sell it today you would lose (30.00) from holding AG Mortgage Investment or give up 4.42% of portfolio value over 90 days.

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

Diamond Hill Investment  vs.  AG Mortgage Investment

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.

AG Mortgage Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AG Mortgage Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Diamond Hill and AG Mortgage

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

The idea behind Diamond Hill Investment and AG Mortgage Investment 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.