Correlation Between Nuveen Equity and Diamond Hill

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

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

Diversification Opportunities for Nuveen Equity and Diamond Hill

-0.19

Correlation Coefficient

Nuveen Equity  Diamond Hill

Good diversification

The 3 months correlation between Nuveen and Diamond is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Equity Longshort 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 Nuveen Equity 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 Nuveen Equity Longshort 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 Nuveen Equity i.e., Nuveen Equity and Diamond Hill go up and down completely randomly.

Pair Corralation between Nuveen Equity and Diamond Hill

Assuming the 90 days horizon Nuveen Equity Longshort is expected to generate 1.22 times more return on investment than Diamond Hill. However, Nuveen Equity is 1.22 times more volatile than Diamond Hill Long Short. It trades about 0.27 of its potential returns per unit of risk. Diamond Hill Long Short is currently generating about 0.04 per unit of risk. If you would invest  5,958  in Nuveen Equity Longshort on September 12, 2024 and sell it today you would earn a total of  549.00  from holding Nuveen Equity Longshort or generate 9.21% return on investment over 90 days.

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

Nuveen Equity Longshort  vs.  Diamond Hill Long Short

Nuveen Equity Longshort

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Equity Longshort are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Nuveen Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Diamond Hill Long

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Long Short are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Nuveen Equity and Diamond Hill

The main advantage of trading using opposite Nuveen Equity and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen Equity 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 Nuveen Equity Longshort 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.

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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.