Correlation Between Diamond Hill and OFS Capital

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

Diversification Opportunities for Diamond Hill and OFS Capital

-0.47

Correlation Coefficient

Diamond Hill  OFS Capital

Very good diversification

The 3 months correlation between Diamond and OFS is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and OFS Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFS Capital Corp 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 OFS Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFS Capital Corp has no effect on the direction of Diamond Hill i.e., Diamond Hill and OFS Capital go up and down completely randomly.

Pair Corralation between Diamond Hill and OFS Capital

Given the investment horizon of 90 days Diamond Hill is expected to generate 3.49 times less return on investment than OFS Capital. But when comparing it to its historical volatility, Diamond Hill Investment is 1.07 times less risky than OFS Capital. It trades about 0.01 of its potential returns per unit of risk. OFS Capital Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  771.00  in OFS Capital Corp on December 1, 2024 and sell it today you would earn a total of  59.00  from holding OFS Capital Corp or generate 7.65% return on investment over 90 days.

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

Diamond Hill Investment  vs.  OFS Capital Corp

Diamond Hill Investment

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

OFS Capital Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OFS Capital Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, OFS Capital is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Diamond Hill and OFS Capital

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

The idea behind Diamond Hill Investment and OFS Capital Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.