Correlation Between Diamond Hill and Sixth Street

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

Diversification Opportunities for Diamond Hill and Sixth Street

-0.65

Correlation Coefficient

Diamond Hill  Sixth Street

Excellent diversification

The 3 months correlation between Diamond and Sixth is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Sixth Street Specialty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sixth Street Specialty 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 Sixth Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sixth Street Specialty has no effect on the direction of Diamond Hill i.e., Diamond Hill and Sixth Street go up and down completely randomly.

Pair Corralation between Diamond Hill and Sixth Street

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Sixth Street. In addition to that, Diamond Hill is 1.19 times more volatile than Sixth Street Specialty. It trades about -0.08 of its total potential returns per unit of risk. Sixth Street Specialty is currently generating about 0.13 per unit of volatility. If you would invest  2,079  in Sixth Street Specialty on December 28, 2024 and sell it today you would earn a total of  155.00  from holding Sixth Street Specialty or generate 7.46% 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.  Sixth Street Specialty

Diamond Hill Investment

Risk-Adjusted Performance

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.

Sixth Street Specialty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sixth Street Specialty are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Sixth Street may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Diamond Hill and Sixth Street

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

The idea behind Diamond Hill Investment and Sixth Street Specialty 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.