Correlation Between Diamond Hill and Spring Valley

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

Diversification Opportunities for Diamond Hill and Spring Valley

-0.04

Correlation Coefficient

Diamond Hill  Spring Valley

Good diversification

The 3 months correlation between Diamond and Spring is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Spring Valley Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spring Valley Acquisition 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 Spring Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spring Valley Acquisition has no effect on the direction of Diamond Hill i.e., Diamond Hill and Spring Valley go up and down completely randomly.

Pair Corralation between Diamond Hill and Spring Valley

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Spring Valley. In addition to that, Diamond Hill is 11.0 times more volatile than Spring Valley Acquisition. It trades about -0.32 of its total potential returns per unit of risk. Spring Valley Acquisition is currently generating about -0.11 per unit of volatility. If you would invest  1,125  in Spring Valley Acquisition on September 16, 2024 and sell it today you would lose (2.00) from holding Spring Valley Acquisition or give up 0.18% 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.  Spring Valley Acquisition

Diamond Hill Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 3 (%) 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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Spring Valley Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spring Valley Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Spring Valley is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Diamond Hill and Spring Valley

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

The idea behind Diamond Hill Investment and Spring Valley Acquisition 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.