Correlation Between Santech Holdings and Diamond Hill

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

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

Diversification Opportunities for Santech Holdings and Diamond Hill

0.29

Correlation Coefficient

Santech Holdings  Diamond Hill

Modest diversification

The 3 months correlation between Santech and Diamond is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Santech Holdings Limited and Diamond Hill Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Investment and Santech Holdings 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 Santech Holdings Limited 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 Investment has no effect on the direction of Santech Holdings i.e., Santech Holdings and Diamond Hill go up and down completely randomly.

Pair Corralation between Santech Holdings and Diamond Hill

Given the investment horizon of 90 days Santech Holdings Limited is expected to generate 22.17 times more return on investment than Diamond Hill. However, Santech Holdings is 22.17 times more volatile than Diamond Hill Investment. It trades about 0.03 of its potential returns per unit of risk. Diamond Hill Investment is currently generating about -0.01 per unit of risk. If you would invest  736.00  in Santech Holdings Limited on September 12, 2024 and sell it today you would lose (666.00) from holding Santech Holdings Limited or give up 90.49% of portfolio value over 90 days.

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

Santech Holdings Limited  vs.  Diamond Hill Investment

Santech Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Santech Holdings Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Santech Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Diamond Hill Investment

Risk-Adjusted Performance

6 of 100

Modest

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.

Pair Trading with Santech Holdings and Diamond Hill

The main advantage of trading using opposite Santech Holdings and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Santech Holdings 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 Santech Holdings Limited and Diamond Hill Investment 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.