Correlation Between Diamond Hill and Roth CH

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

Diversification Opportunities for Diamond Hill and Roth CH

0.46

Correlation Coefficient

Diamond Hill  Roth CH

Very weak diversification

The 3 months correlation between Diamond and Roth is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Roth CH Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roth CH Acquisition 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 Roth CH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roth CH Acquisition has no effect on the direction of Diamond Hill i.e., Diamond Hill and Roth CH go up and down completely randomly.

Pair Corralation between Diamond Hill and Roth CH

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Roth CH. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Hill Investment is 34.7 times less risky than Roth CH. The stock trades about -0.32 of its potential returns per unit of risk. The Roth CH Acquisition is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Roth CH Acquisition on September 16, 2024 and sell it today you would earn a total of  25.00  from holding Roth CH Acquisition or generate 166.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	76.19%
Values	Daily Returns

Diamond Hill Investment  vs.  Roth CH Acquisition

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.

Roth CH Acquisition

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Roth CH Acquisition are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Roth CH showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Hill and Roth CH

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

The idea behind Diamond Hill Investment and Roth CH Acquisition 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.