Correlation Between Diamond Hill and Cohen

Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Cohen 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 Cohen 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 Cohen Company, you can compare the effects of market volatilities on Diamond Hill and Cohen 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 Cohen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Cohen.

Diversification Opportunities for Diamond Hill and Cohen

0.73

Correlation Coefficient

Diamond Hill  Cohen

Poor diversification

The 3 months correlation between Diamond and Cohen is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Cohen Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cohen Company 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 Cohen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cohen Company has no effect on the direction of Diamond Hill i.e., Diamond Hill and Cohen go up and down completely randomly.

Pair Corralation between Diamond Hill and Cohen

Given the investment horizon of 90 days Diamond Hill is expected to generate 2.56 times less return on investment than Cohen. But when comparing it to its historical volatility, Diamond Hill Investment is 1.88 times less risky than Cohen. It trades about 0.09 of its potential returns per unit of risk. Cohen Company is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  834.00  in Cohen Company on September 3, 2024 and sell it today you would earn a total of  186.00  from holding Cohen Company or generate 22.3% return on investment over 90 days.

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

Diamond Hill Investment  vs.  Cohen Company

Diamond Hill Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 6 (%) 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.

Cohen Company

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cohen Company are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical indicators, Cohen displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Hill and Cohen

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

The idea behind Diamond Hill Investment and Cohen Company 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.