Correlation Between Diamond Hill and B Riley

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

Diversification Opportunities for Diamond Hill and B Riley

-0.47

Correlation Coefficient

Diamond Hill  B Riley

Very good diversification

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

Pair Corralation between Diamond Hill and B Riley

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the B Riley. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Hill Investment is 1.75 times less risky than B Riley. The stock trades about -0.07 of its potential returns per unit of risk. The B Riley Financial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,967  in B Riley Financial on December 29, 2024 and sell it today you would earn a total of  222.00  from holding B Riley Financial or generate 11.29% 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.  B Riley Financial

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.

B Riley Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in B Riley Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, B Riley may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Diamond Hill and B Riley

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

The idea behind Diamond Hill Investment and B Riley Financial 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.