Correlation Between Diamond Hill and Pioneer Floating

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

Diversification Opportunities for Diamond Hill and Pioneer Floating

-0.08

Correlation Coefficient

Diamond Hill  Pioneer Floating

Good diversification

The 3 months correlation between Diamond and Pioneer is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Pioneer Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Floating Rate 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 Pioneer Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Floating Rate has no effect on the direction of Diamond Hill i.e., Diamond Hill and Pioneer Floating go up and down completely randomly.

Pair Corralation between Diamond Hill and Pioneer Floating

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Pioneer Floating. In addition to that, Diamond Hill is 3.27 times more volatile than Pioneer Floating Rate. It trades about -0.08 of its total potential returns per unit of risk. Pioneer Floating Rate is currently generating about -0.01 per unit of volatility. If you would invest  949.00  in Pioneer Floating Rate on December 28, 2024 and sell it today you would lose (2.00) from holding Pioneer Floating Rate or give up 0.21% of portfolio value over 90 days.

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

Diamond Hill Investment  vs.  Pioneer Floating Rate

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 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.

Pioneer Floating Rate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pioneer Floating Rate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Pioneer Floating is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Diamond Hill and Pioneer Floating

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

The idea behind Diamond Hill Investment and Pioneer Floating Rate 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.