Correlation Between Diamond Hill and PowerUp Acquisition

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

Diversification Opportunities for Diamond Hill and PowerUp Acquisition

-0.42

Correlation Coefficient

Diamond Hill  PowerUp Acquisition

Very good diversification

The 3 months correlation between Diamond and PowerUp is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and PowerUp Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PowerUp Acquisition Corp 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 PowerUp Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PowerUp Acquisition Corp has no effect on the direction of Diamond Hill i.e., Diamond Hill and PowerUp Acquisition go up and down completely randomly.

Pair Corralation between Diamond Hill and PowerUp Acquisition

Given the investment horizon of 90 days Diamond Hill is expected to generate 16.48 times less return on investment than PowerUp Acquisition. But when comparing it to its historical volatility, Diamond Hill Investment is 13.47 times less risky than PowerUp Acquisition. It trades about 0.05 of its potential returns per unit of risk. PowerUp Acquisition Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4.00  in PowerUp Acquisition Corp on September 16, 2024 and sell it today you would lose (1.01) from holding PowerUp Acquisition Corp or give up 25.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	52.31%
Values	Daily Returns

Diamond Hill Investment  vs.  PowerUp Acquisition Corp

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.

PowerUp Acquisition Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PowerUp Acquisition Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PowerUp Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Hill and PowerUp Acquisition

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

The idea behind Diamond Hill Investment and PowerUp Acquisition Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.