Correlation Between Diamond Hill and Gabelli Global

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

Diversification Opportunities for Diamond Hill and Gabelli Global

0.7

Correlation Coefficient

Diamond Hill  Gabelli Global

Poor diversification

The 3 months correlation between Diamond and Gabelli is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Gabelli Global Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Global Small 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 Gabelli Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Global Small has no effect on the direction of Diamond Hill i.e., Diamond Hill and Gabelli Global go up and down completely randomly.

Pair Corralation between Diamond Hill and Gabelli Global

Given the investment horizon of 90 days Diamond Hill is expected to generate 1.97 times less return on investment than Gabelli Global. In addition to that, Diamond Hill is 1.99 times more volatile than Gabelli Global Small. It trades about 0.05 of its total potential returns per unit of risk. Gabelli Global Small is currently generating about 0.19 per unit of volatility. If you would invest  1,175  in Gabelli Global Small on September 16, 2024 and sell it today you would earn a total of  121.00  from holding Gabelli Global Small or generate 10.3% 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.  Gabelli Global Small

Diamond Hill Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Diamond Hill is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Gabelli Global Small

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli Global Small are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Gabelli Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Diamond Hill and Gabelli Global

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

The idea behind Diamond Hill Investment and Gabelli Global Small 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.