Correlation Between Diamond Hill and Virtus Investment

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

Diversification Opportunities for Diamond Hill and Virtus Investment

0.8

Correlation Coefficient

Diamond Hill  Virtus Investment

Very poor diversification

The 3 months correlation between Diamond and Virtus is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Virtus Investment Partners, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Investment 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 Virtus Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Investment has no effect on the direction of Diamond Hill i.e., Diamond Hill and Virtus Investment go up and down completely randomly.

Pair Corralation between Diamond Hill and Virtus Investment

Given the investment horizon of 90 days Diamond Hill is expected to generate 3.39 times less return on investment than Virtus Investment. But when comparing it to its historical volatility, Diamond Hill Investment is 1.17 times less risky than Virtus Investment. It trades about 0.05 of its potential returns per unit of risk. Virtus Investment Partners, is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  20,403  in Virtus Investment Partners, on September 16, 2024 and sell it today you would earn a total of  3,567  from holding Virtus Investment Partners, or generate 17.48% return on investment over 90 days.

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

Diamond Hill Investment  vs.  Virtus Investment Partners,

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.

Virtus Investment

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Investment Partners, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Virtus Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Hill and Virtus Investment

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

The idea behind Diamond Hill Investment and Virtus Investment Partners, 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.