Correlation Between Diamond Hill and Invesco Trust

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

Diversification Opportunities for Diamond Hill and Invesco Trust

-0.31

Correlation Coefficient

Diamond Hill  Invesco Trust

Very good diversification

The 3 months correlation between Diamond and Invesco is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Invesco Trust For in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Trust For 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 Invesco Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Trust For has no effect on the direction of Diamond Hill i.e., Diamond Hill and Invesco Trust go up and down completely randomly.

Pair Corralation between Diamond Hill and Invesco Trust

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Invesco Trust. In addition to that, Diamond Hill is 1.62 times more volatile than Invesco Trust For. It trades about -0.07 of its total potential returns per unit of risk. Invesco Trust For is currently generating about 0.03 per unit of volatility. If you would invest  1,033  in Invesco Trust For on December 29, 2024 and sell it today you would earn a total of  10.00  from holding Invesco Trust For or generate 0.97% return on investment over 90 days.

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

Diamond Hill Investment  vs.  Invesco Trust For

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.

Invesco Trust For

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Trust For are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Invesco Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Diamond Hill and Invesco Trust

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

The idea behind Diamond Hill Investment and Invesco Trust For 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..