Correlation Between Eagle Small and Diamond Hill

Can any of the company-specific risk be diversified away by investing in both Eagle Small and Diamond Hill 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 Eagle Small and Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eagle Small Cap and Diamond Hill E, you can compare the effects of market volatilities on Eagle Small and Diamond Hill 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 Eagle Small with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Small and Diamond Hill.

Diversification Opportunities for Eagle Small and Diamond Hill

-0.48

Correlation Coefficient

Eagle Small  Diamond Hill

Very good diversification

The 3 months correlation between Eagle and Diamond is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Small Cap and Diamond Hill E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill E and Eagle Small 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 Eagle Small Cap are associated (or correlated) with Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill E has no effect on the direction of Eagle Small i.e., Eagle Small and Diamond Hill go up and down completely randomly.

Pair Corralation between Eagle Small and Diamond Hill

Assuming the 90 days horizon Eagle Small Cap is expected to generate 3.92 times more return on investment than Diamond Hill. However, Eagle Small is 3.92 times more volatile than Diamond Hill E. It trades about 0.11 of its potential returns per unit of risk. Diamond Hill E is currently generating about -0.16 per unit of risk. If you would invest  2,453  in Eagle Small Cap on September 16, 2024 and sell it today you would earn a total of  181.00  from holding Eagle Small Cap or generate 7.38% return on investment over 90 days.

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

Eagle Small Cap  vs.  Diamond Hill E

Eagle Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Small Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Eagle Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Diamond Hill E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Hill E has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Diamond Hill is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eagle Small and Diamond Hill

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

The idea behind Eagle Small Cap and Diamond Hill E 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.