Correlation Between Diamond Hill and Via Renewables

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

Diversification Opportunities for Diamond Hill and Via Renewables

-0.81

Correlation Coefficient

Diamond Hill  Via Renewables

Pay attention - limited upside

The 3 months correlation between Diamond and Via is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Long Short and Via Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Via Renewables 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 Via Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Via Renewables has no effect on the direction of Diamond Hill i.e., Diamond Hill and Via Renewables go up and down completely randomly.

Pair Corralation between Diamond Hill and Via Renewables

Assuming the 90 days horizon Diamond Hill is expected to generate 20.5 times less return on investment than Via Renewables. But when comparing it to its historical volatility, Diamond Hill Long Short is 3.57 times less risky than Via Renewables. It trades about 0.01 of its potential returns per unit of risk. Via Renewables is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,700  in Via Renewables on October 5, 2024 and sell it today you would earn a total of  603.00  from holding Via Renewables or generate 35.47% return on investment over 90 days.

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

Diamond Hill Long Short  vs.  Via Renewables

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 latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Via Renewables

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Via Renewables reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Hill and Via Renewables

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

The idea behind Diamond Hill Long Short and Via Renewables 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.