Correlation Between Diamond Hill and Royce Global

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

Diversification Opportunities for Diamond Hill and Royce Global

0.52

Correlation Coefficient

Diamond Hill  Royce Global

Very weak diversification

The 3 months correlation between Diamond and Royce is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Royce Global Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Global Value 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 Royce Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Global Value has no effect on the direction of Diamond Hill i.e., Diamond Hill and Royce Global go up and down completely randomly.

Pair Corralation between Diamond Hill and Royce Global

Given the investment horizon of 90 days Diamond Hill is expected to generate 9.87 times less return on investment than Royce Global. In addition to that, Diamond Hill is 1.5 times more volatile than Royce Global Value. It trades about 0.0 of its total potential returns per unit of risk. Royce Global Value is currently generating about 0.06 per unit of volatility. If you would invest  896.00  in Royce Global Value on September 4, 2024 and sell it today you would earn a total of  291.00  from holding Royce Global Value or generate 32.48% return on investment over 90 days.

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

Diamond Hill Investment  vs.  Royce Global Value

Diamond Hill Investment

Risk-Adjusted Performance

6 of 100

OK

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.

Royce Global Value

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Global Value are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Royce Global is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Diamond Hill and Royce Global

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

The idea behind Diamond Hill Investment and Royce Global Value 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.