Correlation Between Diamond Hill and Nuveen Mid

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

By analyzing existing cross correlation between Diamond Hill All and Nuveen Mid Cap, you can compare the effects of market volatilities on Diamond Hill and Nuveen Mid 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 Nuveen Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Nuveen Mid.

Diversification Opportunities for Diamond Hill and Nuveen Mid

0.86

Correlation Coefficient

Diamond Hill  Nuveen Mid

Very poor diversification

The 3 months correlation between Diamond and Nuveen is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill All and Nuveen Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Mid Cap 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 All are associated (or correlated) with Nuveen Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Mid Cap has no effect on the direction of Diamond Hill i.e., Diamond Hill and Nuveen Mid go up and down completely randomly.

Pair Corralation between Diamond Hill and Nuveen Mid

Assuming the 90 days horizon Diamond Hill is expected to generate 1.72 times less return on investment than Nuveen Mid. In addition to that, Diamond Hill is 1.12 times more volatile than Nuveen Mid Cap. It trades about 0.08 of its total potential returns per unit of risk. Nuveen Mid Cap is currently generating about 0.15 per unit of volatility. If you would invest  5,705  in Nuveen Mid Cap on September 4, 2024 and sell it today you would earn a total of  499.00  from holding Nuveen Mid Cap or generate 8.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Diamond Hill All  vs.  Nuveen Mid Cap

Diamond Hill All

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill All are ranked lower than 6 (%) 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.

Nuveen Mid Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Mid Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Nuveen Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Diamond Hill and Nuveen Mid

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

The idea behind Diamond Hill All and Nuveen Mid Cap 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.