Correlation Between Diamond Hill and Sentage Holdings

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

Diversification Opportunities for Diamond Hill and Sentage Holdings

-0.64

Correlation Coefficient

Diamond Hill  Sentage Holdings

Excellent diversification

The 3 months correlation between Diamond and Sentage is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Sentage Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentage Holdings 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 Sentage Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentage Holdings has no effect on the direction of Diamond Hill i.e., Diamond Hill and Sentage Holdings go up and down completely randomly.

Pair Corralation between Diamond Hill and Sentage Holdings

Given the investment horizon of 90 days Diamond Hill Investment is expected to generate 0.48 times more return on investment than Sentage Holdings. However, Diamond Hill Investment is 2.1 times less risky than Sentage Holdings. It trades about 0.07 of its potential returns per unit of risk. Sentage Holdings is currently generating about 0.0 per unit of risk. If you would invest  15,663  in Diamond Hill Investment on August 30, 2024 and sell it today you would earn a total of  964.00  from holding Diamond Hill Investment or generate 6.15% return on investment over 90 days.

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

Diamond Hill Investment  vs.  Sentage Holdings

Diamond Hill Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating forward indicators, Diamond Hill may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Sentage Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sentage Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sentage Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Diamond Hill and Sentage Holdings

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

The idea behind Diamond Hill Investment and Sentage Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.