Correlation Between Diamond Hill and Bank of America
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Bank of America 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 Bank of America 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 Bank of America, you can compare the effects of market volatilities on Diamond Hill and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Bank of America.
Diversification Opportunities for Diamond Hill and Bank of America
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Diamond and Bank is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Diamond Hill i.e., Diamond Hill and Bank of America go up and down completely randomly.
Pair Corralation between Diamond Hill and Bank of America
Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Bank of America. In addition to that, Diamond Hill is 1.27 times more volatile than Bank of America. It trades about -0.04 of its total potential returns per unit of risk. Bank of America is currently generating about 0.17 per unit of volatility. If you would invest 3,338 in Bank of America on February 12, 2024 and sell it today you would earn a total of 507.00 from holding Bank of America or generate 15.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamond Hill Investment vs. Bank of America
Performance |
| Timeline |
| Diamond Hill Investment |
| Bank of America |
Diamond Hill and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and Bank of America
The main advantage of trading using opposite Diamond Hill and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America'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 |
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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