Correlation Between Diamond Hill and Thunder Bridge

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

Diversification Opportunities for Diamond Hill and Thunder Bridge

-0.48

Correlation Coefficient

Diamond Hill  Thunder Bridge

Very good diversification

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

Pair Corralation between Diamond Hill and Thunder Bridge

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Thunder Bridge. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Hill Investment is 1.86 times less risky than Thunder Bridge. The stock trades about -0.02 of its potential returns per unit of risk. The Thunder Bridge Capital is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,060  in Thunder Bridge Capital on October 20, 2024 and sell it today you would earn a total of  164.00  from holding Thunder Bridge Capital or generate 15.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	59.68%
Values	Daily Returns

Diamond Hill Investment  vs.  Thunder Bridge Capital

Diamond Hill Investment

Risk-Adjusted Performance

0 of 100

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.

Thunder Bridge Capital

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Thunder Bridge Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively uncertain fundamental indicators, Thunder Bridge reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Hill and Thunder Bridge

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

The idea behind Diamond Hill Investment and Thunder Bridge Capital 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.