Correlation Between Rand Capital and Diamond Hill

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

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

Diversification Opportunities for Rand Capital and Diamond Hill

-0.31

Correlation Coefficient

Rand Capital  Diamond Hill

Very good diversification

The 3 months correlation between Rand and Diamond is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Rand Capital 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 Rand Capital 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 Rand Capital 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 Rand Capital i.e., Rand Capital and Diamond Hill go up and down completely randomly.

Pair Corralation between Rand Capital and Diamond Hill

Given the investment horizon of 90 days Rand Capital Corp is expected to under-perform the Diamond Hill. In addition to that, Rand Capital is 1.2 times more volatile than Diamond Hill Investment. It trades about -0.09 of its total potential returns per unit of risk. Diamond Hill Investment is currently generating about 0.07 per unit of volatility. If you would invest  15,522  in Diamond Hill Investment on September 3, 2024 and sell it today you would earn a total of  1,013  from holding Diamond Hill Investment or generate 6.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Rand Capital Corp  vs.  Diamond Hill Investment

Rand Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rand Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Diamond Hill Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating forward indicators, Diamond Hill may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rand Capital and Diamond Hill

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

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..