Correlation Between Diamond Hill and Deutsche Real

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

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

Diversification Opportunities for Diamond Hill and Deutsche Real

0.86

Correlation Coefficient

Diamond Hill  Deutsche Real

Very poor diversification

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

Pair Corralation between Diamond Hill and Deutsche Real

Assuming the 90 days horizon Diamond Hill Small is expected to under-perform the Deutsche Real. In addition to that, Diamond Hill is 1.83 times more volatile than Deutsche Real Estate. It trades about -0.36 of its total potential returns per unit of risk. Deutsche Real Estate is currently generating about -0.26 per unit of volatility. If you would invest  2,299  in Deutsche Real Estate on October 11, 2024 and sell it today you would lose (170.00) from holding Deutsche Real Estate or give up 7.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Diamond Hill Small  vs.  Deutsche Real Estate

Diamond Hill Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Hill Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Deutsche Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Deutsche Real

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

The idea behind Diamond Hill Small and Deutsche Real Estate 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.