Correlation Between Diamond Hill and BGC

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

By analyzing existing cross correlation between Diamond Hill Investment and BGC Group, you can compare the effects of market volatilities on Diamond Hill and BGC 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 BGC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and BGC.

Diversification Opportunities for Diamond Hill and BGC

0.59

Correlation Coefficient

Diamond Hill  BGC

Very weak diversification

The 3 months correlation between Diamond and BGC is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and BGC Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BGC Group 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 Investment are associated (or correlated) with BGC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BGC Group has no effect on the direction of Diamond Hill i.e., Diamond Hill and BGC go up and down completely randomly.

Pair Corralation between Diamond Hill and BGC

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the BGC. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Hill Investment is 1.32 times less risky than BGC. The stock trades about -0.02 of its potential returns per unit of risk. The BGC Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  916.00  in BGC Group on September 29, 2024 and sell it today you would lose (6.00) from holding BGC Group or give up 0.66% of portfolio value over 90 days.

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

Diamond Hill Investment  vs.  BGC Group

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.

BGC Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BGC Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, BGC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Diamond Hill and BGC

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

The idea behind Diamond Hill Investment and BGC Group 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 Stocks Directory module to find actively traded stocks across global markets.