Correlation Between Diamond Hill and Realty Income

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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

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Diamond and Realty is 0.68. 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 Investment is expected to generate 1.29 times more return on investment than Realty Income. However, Diamond Hill is 1.29 times more volatile than Realty Income Corp. It trades about 0.0 of its potential returns per unit of risk. Realty Income Corp is currently generating about -0.01 per unit of risk. If you would invest  15,873  in Diamond Hill Investment on December 19, 2023 and sell it today you would lose (902.00) from holding Diamond Hill Investment or give up 5.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.73%
ValuesDaily Returns

Diamond Hill Investment  vs.  Realty Income Corp

 Performance 
       Timeline  
Diamond Hill Investment 

Risk-Adjusted Performance

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High
Very Weak
Over the last 90 days Diamond Hill Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
Realty me Corp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Realty Income Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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.
The idea behind Diamond Hill Investment and Realty Income Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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