Correlation Between Diamond Hill and XAI Octagon

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

Diversification Opportunities for Diamond Hill and XAI Octagon

0.48

Correlation Coefficient

Diamond Hill  XAI Octagon

Very weak diversification

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

Pair Corralation between Diamond Hill and XAI Octagon

Given the investment horizon of 90 days Diamond Hill Investment is expected to generate 1.38 times more return on investment than XAI Octagon. However, Diamond Hill is 1.38 times more volatile than XAI Octagon Floating. It trades about -0.07 of its potential returns per unit of risk. XAI Octagon Floating is currently generating about -0.15 per unit of risk. If you would invest  15,339  in Diamond Hill Investment on December 27, 2024 and sell it today you would lose (769.00) from holding Diamond Hill Investment or give up 5.01% of portfolio value over 90 days.

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

Diamond Hill Investment  vs.  XAI Octagon Floating

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.

XAI Octagon Floating

Risk-Adjusted Performance

Very Weak

Over the last 90 days XAI Octagon Floating has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Diamond Hill and XAI Octagon

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

The idea behind Diamond Hill Investment and XAI Octagon Floating 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.