Correlation Between Mars Acquisition and Diamond Hill

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

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

Diversification Opportunities for Mars Acquisition and Diamond Hill

0.03

Correlation Coefficient

Mars Acquisition  Diamond Hill

Significant diversification

The 3 months correlation between Mars and Diamond is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Mars Acquisition Corp and Diamond Hill Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Investment and Mars Acquisition 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 Mars Acquisition Corp 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 Investment has no effect on the direction of Mars Acquisition i.e., Mars Acquisition and Diamond Hill go up and down completely randomly.

Pair Corralation between Mars Acquisition and Diamond Hill

Assuming the 90 days horizon Mars Acquisition Corp is expected to generate 5.67 times more return on investment than Diamond Hill. However, Mars Acquisition is 5.67 times more volatile than Diamond Hill Investment. It trades about 0.15 of its potential returns per unit of risk. Diamond Hill Investment is currently generating about -0.43 per unit of risk. If you would invest  32.00  in Mars Acquisition Corp on September 21, 2024 and sell it today you would earn a total of  5.11  from holding Mars Acquisition Corp or generate 15.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.36%
Values	Daily Returns

Mars Acquisition Corp  vs.  Diamond Hill Investment

Mars Acquisition Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mars Acquisition Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Mars Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Diamond Hill Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Hill Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Diamond Hill is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Mars Acquisition and Diamond Hill

The main advantage of trading using opposite Mars Acquisition and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mars Acquisition 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 Mars Acquisition Corp and Diamond Hill Investment 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.