Correlation Between Diamond Hill and Runway Growth

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

Diversification Opportunities for Diamond Hill and Runway Growth

0.48

Correlation Coefficient

Diamond Hill  Runway Growth

Very weak diversification

The 3 months correlation between Diamond and Runway is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Runway Growth Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Runway Growth Finance 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 Runway Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Runway Growth Finance has no effect on the direction of Diamond Hill i.e., Diamond Hill and Runway Growth go up and down completely randomly.

Pair Corralation between Diamond Hill and Runway Growth

Given the investment horizon of 90 days Diamond Hill is expected to generate 1.33 times less return on investment than Runway Growth. In addition to that, Diamond Hill is 1.46 times more volatile than Runway Growth Finance. It trades about 0.06 of its total potential returns per unit of risk. Runway Growth Finance is currently generating about 0.11 per unit of volatility. If you would invest  1,001  in Runway Growth Finance on September 14, 2024 and sell it today you would earn a total of  76.00  from holding Runway Growth Finance or generate 7.59% 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.  Runway Growth Finance

Diamond Hill Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 4 (%) 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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Runway Growth Finance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Runway Growth Finance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Runway Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Diamond Hill and Runway Growth

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

The idea behind Diamond Hill Investment and Runway Growth Finance 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.