Correlation Between Fulcrum Diversified and Diamond Hill

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

By analyzing existing cross correlation between Fulcrum Diversified Absolute and Diamond Hill Long Short, you can compare the effects of market volatilities on Fulcrum Diversified and Diamond Hill 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 Fulcrum Diversified with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fulcrum Diversified and Diamond Hill.

Diversification Opportunities for Fulcrum Diversified and Diamond Hill

0.8

Correlation Coefficient

Fulcrum Diversified  Diamond Hill

Very poor diversification

The 3 months correlation between Fulcrum and Diamond is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fulcrum Diversified Absolute and Diamond Hill Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Long and Fulcrum Diversified 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 Fulcrum Diversified Absolute are associated (or correlated) with Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Long has no effect on the direction of Fulcrum Diversified i.e., Fulcrum Diversified and Diamond Hill go up and down completely randomly.

Pair Corralation between Fulcrum Diversified and Diamond Hill

Assuming the 90 days horizon Fulcrum Diversified Absolute is expected to generate 0.69 times more return on investment than Diamond Hill. However, Fulcrum Diversified Absolute is 1.46 times less risky than Diamond Hill. It trades about -0.12 of its potential returns per unit of risk. Diamond Hill Long Short is currently generating about -0.19 per unit of risk. If you would invest  950.00  in Fulcrum Diversified Absolute on December 4, 2024 and sell it today you would lose (7.00) from holding Fulcrum Diversified Absolute or give up 0.74% of portfolio value over 90 days.

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

Fulcrum Diversified Absolute  vs.  Diamond Hill Long Short

Fulcrum Diversified

Risk-Adjusted Performance

Very Weak

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

Diamond Hill Long

Risk-Adjusted Performance

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 primary indicators, Diamond Hill is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fulcrum Diversified and Diamond Hill

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

The idea behind Fulcrum Diversified Absolute and Diamond Hill Long Short 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.