Correlation Between Diamond Hill and Gotham Defensive
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Gotham Defensive 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 Gotham Defensive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamond Hill Long Short and Gotham Defensive Long, you can compare the effects of market volatilities on Diamond Hill and Gotham Defensive 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 Gotham Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Gotham Defensive.
Diversification Opportunities for Diamond Hill and Gotham Defensive
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Diamond and Gotham is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Long Short and Gotham Defensive Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gotham Defensive Long 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 Long Short are associated (or correlated) with Gotham Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gotham Defensive Long has no effect on the direction of Diamond Hill i.e., Diamond Hill and Gotham Defensive go up and down completely randomly.
Pair Corralation between Diamond Hill and Gotham Defensive
Assuming the 90 days horizon Diamond Hill Long Short is expected to generate 0.82 times more return on investment than Gotham Defensive. However, Diamond Hill Long Short is 1.21 times less risky than Gotham Defensive. It trades about 0.09 of its potential returns per unit of risk. Gotham Defensive Long is currently generating about -0.02 per unit of risk. If you would invest 2,876 in Diamond Hill Long Short on March 14, 2024 and sell it today you would earn a total of 76.00 from holding Diamond Hill Long Short or generate 2.64% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Diamond Hill Long Short vs. Gotham Defensive Long
Performance |
Timeline |
Diamond Hill Long |
Gotham Defensive Long |
Diamond Hill and Gotham Defensive Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Diamond Hill and Gotham Defensive
The main advantage of trading using opposite Diamond Hill and Gotham Defensive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Gotham Defensive 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 Gotham Defensive will offset losses from the drop in Gotham Defensive's long position.Diamond Hill vs. Gateway Fund Class | Diamond Hill vs. Aqr Managed Futures | Diamond Hill vs. Boston Partners Longshort | Diamond Hill vs. Calamos Market Neutral |
Gotham Defensive vs. Gotham Hedged E | Gotham Defensive vs. Gotham Large Value | Gotham Defensive vs. Gotham Enhanced 500 | Gotham Defensive vs. Gotham Enhanced Return |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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