Correlation Between Veeco Instruments and Diamond Hill

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

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

Diversification Opportunities for Veeco Instruments and Diamond Hill

0.6

Correlation Coefficient

Veeco Instruments  Diamond Hill

Poor diversification

The 3 months correlation between Veeco and Diamond is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Veeco Instruments 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 Veeco Instruments 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 Veeco Instruments 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 Veeco Instruments i.e., Veeco Instruments and Diamond Hill go up and down completely randomly.

Pair Corralation between Veeco Instruments and Diamond Hill

Given the investment horizon of 90 days Veeco Instruments is expected to generate 1.76 times more return on investment than Diamond Hill. However, Veeco Instruments is 1.76 times more volatile than Diamond Hill Investment. It trades about 0.14 of its potential returns per unit of risk. Diamond Hill Investment is currently generating about 0.06 per unit of risk. If you would invest  3,496  in Veeco Instruments on February 28, 2024 and sell it today you would earn a total of  673.00  from holding Veeco Instruments or generate 19.25% return on investment over 90 days.

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

Veeco Instruments  vs.  Diamond Hill Investment

Veeco Instruments

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Veeco Instruments are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Veeco Instruments displayed solid returns over the last few months and may actually be approaching a breakup point.

Diamond Hill Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 4 (%) 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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Veeco Instruments and Diamond Hill

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

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..