Correlation Between Utah Medical and Diamond Hill

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

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

Diversification Opportunities for Utah Medical and Diamond Hill

0.16

Correlation Coefficient

Utah Medical  Diamond Hill

Average diversification

The 3 months correlation between Utah and Diamond is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Utah Medical Products 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 Utah Medical 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 Utah Medical Products 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 Utah Medical i.e., Utah Medical and Diamond Hill go up and down completely randomly.

Pair Corralation between Utah Medical and Diamond Hill

Given the investment horizon of 90 days Utah Medical Products is expected to under-perform the Diamond Hill. But the stock apears to be less risky and, when comparing its historical volatility, Utah Medical Products is 1.63 times less risky than Diamond Hill. The stock trades about -0.09 of its potential returns per unit of risk. The Diamond Hill Investment is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  15,282  in Diamond Hill Investment on September 16, 2024 and sell it today you would earn a total of  664.00  from holding Diamond Hill Investment or generate 4.34% return on investment over 90 days.

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

Utah Medical Products  vs.  Diamond Hill Investment

Utah Medical Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Utah Medical Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Utah Medical is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Utah Medical and Diamond Hill

The main advantage of trading using opposite Utah Medical and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Utah Medical 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 Utah Medical Products 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.