Correlation Between Diamond Hill and Thornburg Income

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

Diversification Opportunities for Diamond Hill and Thornburg Income

-0.54

Correlation Coefficient

Diamond Hill  Thornburg Income

Excellent diversification

The 3 months correlation between Diamond and Thornburg is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Thornburg Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Income Builder 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 Thornburg Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Income Builder has no effect on the direction of Diamond Hill i.e., Diamond Hill and Thornburg Income go up and down completely randomly.

Pair Corralation between Diamond Hill and Thornburg Income

Given the investment horizon of 90 days Diamond Hill is expected to generate 2.05 times less return on investment than Thornburg Income. In addition to that, Diamond Hill is 2.13 times more volatile than Thornburg Income Builder. It trades about 0.02 of its total potential returns per unit of risk. Thornburg Income Builder is currently generating about 0.1 per unit of volatility. If you would invest  1,408  in Thornburg Income Builder on September 4, 2024 and sell it today you would earn a total of  270.00  from holding Thornburg Income Builder or generate 19.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Diamond Hill Investment  vs.  Thornburg Income Builder

Diamond Hill Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 7 (%) 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 January 2025.

Thornburg Income Builder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thornburg Income Builder has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Thornburg Income 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 Thornburg Income

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

The idea behind Diamond Hill Investment and Thornburg Income Builder 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.