Correlation Between Diamond Hill and Realty Income
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Realty Income 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 Realty Income 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 Realty Income Corp, you can compare the effects of market volatilities on Diamond Hill and Realty Income 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 Realty Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Realty Income.
Diversification Opportunities for Diamond Hill and Realty Income
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Diamond and Realty is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Realty Income Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty me Corp 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 Realty Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realty me Corp has no effect on the direction of Diamond Hill i.e., Diamond Hill and Realty Income go up and down completely randomly.
Pair Corralation between Diamond Hill and Realty Income
Given the investment horizon of 90 days Diamond Hill is expected to generate 4.76 times less return on investment than Realty Income. But when comparing it to its historical volatility, Diamond Hill Investment is 1.33 times less risky than Realty Income. It trades about 0.03 of its potential returns per unit of risk. Realty Income Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,192 in Realty Income Corp on January 24, 2024 and sell it today you would earn a total of 147.00 from holding Realty Income Corp or generate 2.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamond Hill Investment vs. Realty Income Corp
Performance |
| Timeline |
| Diamond Hill Investment |
| Realty me Corp |
Diamond Hill and Realty Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and Realty Income
The main advantage of trading using opposite Diamond Hill and Realty Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Realty Income 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 Realty Income will offset losses from the drop in Realty Income's long position.| Diamond Hill vs. Federated Premier Municipal | Diamond Hill vs. Blackrock Muniyield | Diamond Hill vs. NXG NextGen Infrastructure | Diamond Hill vs. Federated Investors B |
| Realty Income vs. Federal Realty Investment | Realty Income vs. Macerich Company | Realty Income vs. National Retail Properties | Realty Income vs. Kimco Realty |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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