Correlation Between Diamond Hill and Sycamore Entmt

Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Sycamore Entmt 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 Sycamore Entmt into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diamond Hill Long Short and Sycamore Entmt Grp, you can compare the effects of market volatilities on Diamond Hill and Sycamore Entmt 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 Sycamore Entmt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Sycamore Entmt.

Diversification Opportunities for Diamond Hill and Sycamore Entmt

-0.51

Correlation Coefficient

Diamond Hill  Sycamore Entmt

Excellent diversification

The 3 months correlation between Diamond and Sycamore is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Long Short and Sycamore Entmt Grp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sycamore Entmt Grp 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 Long Short are associated (or correlated) with Sycamore Entmt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sycamore Entmt Grp has no effect on the direction of Diamond Hill i.e., Diamond Hill and Sycamore Entmt go up and down completely randomly.

Pair Corralation between Diamond Hill and Sycamore Entmt

Assuming the 90 days horizon Diamond Hill is expected to generate 17.64 times less return on investment than Sycamore Entmt. But when comparing it to its historical volatility, Diamond Hill Long Short is 24.45 times less risky than Sycamore Entmt. It trades about 0.07 of its potential returns per unit of risk. Sycamore Entmt Grp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.08  in Sycamore Entmt Grp on December 29, 2024 and sell it today you would lose (0.01) from holding Sycamore Entmt Grp or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Diamond Hill Long Short  vs.  Sycamore Entmt Grp

Diamond Hill Long

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Long Short are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Diamond Hill is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sycamore Entmt Grp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sycamore Entmt Grp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Sycamore Entmt demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Hill and Sycamore Entmt

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

The idea behind Diamond Hill Long Short and Sycamore Entmt Grp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.