Correlation Between Diamond Hill and Hotchkis Wiley

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

Diversification Opportunities for Diamond Hill and Hotchkis Wiley

0.96

Correlation Coefficient

Diamond Hill  Hotchkis Wiley

Almost no diversification

The 3 months correlation between Diamond and Hotchkis is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill All and Hotchkis Wiley Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotchkis Wiley Small 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 Hotchkis Wiley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotchkis Wiley Small has no effect on the direction of Diamond Hill i.e., Diamond Hill and Hotchkis Wiley go up and down completely randomly.

Pair Corralation between Diamond Hill and Hotchkis Wiley

Assuming the 90 days horizon Diamond Hill All is expected to generate 0.91 times more return on investment than Hotchkis Wiley. However, Diamond Hill All is 1.1 times less risky than Hotchkis Wiley. It trades about -0.07 of its potential returns per unit of risk. Hotchkis Wiley Small is currently generating about -0.09 per unit of risk. If you would invest  2,374  in Diamond Hill All on December 30, 2024 and sell it today you would lose (113.00) from holding Diamond Hill All or give up 4.76% of portfolio value over 90 days.

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

Diamond Hill All  vs.  Hotchkis Wiley Small

Diamond Hill All

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamond Hill All 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.

Hotchkis Wiley Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hotchkis Wiley Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Diamond Hill and Hotchkis Wiley

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

The idea behind Diamond Hill All and Hotchkis Wiley Small 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.