Correlation Between AllianceBernstein and Diamond Hill

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

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

Diversification Opportunities for AllianceBernstein and Diamond Hill

-0.25

Correlation Coefficient

AllianceBernstein  Diamond Hill

Very good diversification

The 3 months correlation between AllianceBernstein and Diamond is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding AllianceBernstein Holding LP 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 AllianceBernstein 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 AllianceBernstein Holding LP 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 AllianceBernstein i.e., AllianceBernstein and Diamond Hill go up and down completely randomly.

Pair Corralation between AllianceBernstein and Diamond Hill

Allowing for the 90-day total investment horizon AllianceBernstein Holding LP is expected to generate 0.87 times more return on investment than Diamond Hill. However, AllianceBernstein Holding LP is 1.15 times less risky than Diamond Hill. It trades about 0.08 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  3,046  in AllianceBernstein Holding LP on January 20, 2024 and sell it today you would earn a total of  257.00  from holding AllianceBernstein Holding LP or generate 8.44% return on investment over 90 days.

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

AllianceBernstein Holding LP  vs.  Diamond Hill Investment

AllianceBernstein

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AllianceBernstein Holding LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, AllianceBernstein is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Diamond Hill Investment

Risk-Adjusted Performance

0 of 100

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 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 AllianceBernstein and Diamond Hill

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

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.