Correlation Between Diamond Hill and Balter Invenomic

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

Diversification Opportunities for Diamond Hill and Balter Invenomic

-0.22

Correlation Coefficient

Diamond Hill  Balter Invenomic

Very good diversification

The 3 months correlation between Diamond and Balter is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Long Short and Balter Invenomic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balter Invenomic 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 Balter Invenomic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balter Invenomic has no effect on the direction of Diamond Hill i.e., Diamond Hill and Balter Invenomic go up and down completely randomly.

Pair Corralation between Diamond Hill and Balter Invenomic

Assuming the 90 days horizon Diamond Hill Long Short is expected to generate 0.68 times more return on investment than Balter Invenomic. However, Diamond Hill Long Short is 1.48 times less risky than Balter Invenomic. It trades about -0.03 of its potential returns per unit of risk. Balter Invenomic is currently generating about -0.06 per unit of risk. If you would invest  3,013  in Diamond Hill Long Short on August 31, 2024 and sell it today you would lose (27.00) from holding Diamond Hill Long Short or give up 0.9% of portfolio value over 90 days.

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

Diamond Hill Long Short  vs.  Balter Invenomic

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.

Balter Invenomic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Balter Invenomic has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Balter Invenomic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Diamond Hill and Balter Invenomic

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

The idea behind Diamond Hill Long Short and Balter Invenomic 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.