Correlation Between Loblaw Companies and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both Loblaw Companies 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 Loblaw Companies and Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loblaw Companies Limited and Diamond Hill Investment, you can compare the effects of market volatilities on Loblaw Companies 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 Loblaw Companies with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loblaw Companies and Diamond Hill.
Diversification Opportunities for Loblaw Companies and Diamond Hill
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Loblaw and Diamond is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Loblaw Companies 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 Loblaw Companies 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 Loblaw Companies 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 Loblaw Companies i.e., Loblaw Companies and Diamond Hill go up and down completely randomly.
Pair Corralation between Loblaw Companies and Diamond Hill
Assuming the 90 days horizon Loblaw Companies Limited is expected to under-perform the Diamond Hill. But the pink sheet apears to be less risky and, when comparing its historical volatility, Loblaw Companies Limited is 1.29 times less risky than Diamond Hill. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Diamond Hill Investment is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 14,974 in Diamond Hill Investment on January 26, 2024 and sell it today you would earn a total of 196.00 from holding Diamond Hill Investment or generate 1.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Loblaw Companies Limited vs. Diamond Hill Investment
Performance |
| Timeline |
| Loblaw Companies |
| Diamond Hill Investment |
Loblaw Companies and Diamond Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loblaw Companies and Diamond Hill
The main advantage of trading using opposite Loblaw Companies and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loblaw Companies 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.| Loblaw Companies vs. Merck Company | Loblaw Companies vs. Chevron Corp | Loblaw Companies vs. MagnaChip Semiconductor |
| Diamond Hill vs. Federated Premier Municipal | Diamond Hill vs. Blackrock Muniyield | Diamond Hill vs. NXG NextGen Infrastructure | Diamond Hill vs. Federated Investors B |
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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