Correlation Between Diamond Hill and Spectrum Fund

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

Diversification Opportunities for Diamond Hill and Spectrum Fund

0.16

Correlation Coefficient

Diamond Hill  Spectrum Fund

Average diversification

The 3 months correlation between Diamond and Spectrum is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Long Short and Spectrum Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Fund Instit 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 Spectrum Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Fund Instit has no effect on the direction of Diamond Hill i.e., Diamond Hill and Spectrum Fund go up and down completely randomly.

Pair Corralation between Diamond Hill and Spectrum Fund

Assuming the 90 days horizon Diamond Hill Long Short is expected to under-perform the Spectrum Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Diamond Hill Long Short is 1.65 times less risky than Spectrum Fund. The mutual fund trades about 0.0 of its potential returns per unit of risk. The Spectrum Fund Institutional is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,442  in Spectrum Fund Institutional on September 4, 2024 and sell it today you would earn a total of  102.00  from holding Spectrum Fund Institutional or generate 7.07% return on investment over 90 days.

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

Diamond Hill Long Short  vs.  Spectrum Fund Institutional

Diamond Hill Long

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Hill Long Short has generated negative risk-adjusted returns adding no value to fund investors. 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.

Spectrum Fund Instit

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spectrum Fund Institutional are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Spectrum Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Diamond Hill and Spectrum Fund

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

The idea behind Diamond Hill Long Short and Spectrum Fund Institutional 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.