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

0.67

Correlation Coefficient

Diamond Hill  Thunder Bridge

Poor diversification

The 3 months correlation between Diamond and Thunder is 0.67. 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 generate 2.0 times more return on investment than Thunder Bridge. However, Diamond Hill is 2.0 times more volatile than Thunder Bridge Capital. It trades about 0.08 of its potential returns per unit of risk. Thunder Bridge Capital is currently generating about 0.14 per unit of risk. If you would invest  15,439  in Diamond Hill Investment on September 4, 2024 and sell it today you would earn a total of  1,203  from holding Diamond Hill Investment or generate 7.79% return on investment over 90 days.

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

Diamond Hill Investment  vs.  Thunder Bridge Capital

Diamond Hill Investment

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 6 (%) 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.

Thunder Bridge Capital

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thunder Bridge Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Thunder Bridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.