Correlation Between Diamond Hill and Bank of New York

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Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Bank of New York 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 New York into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamond Hill Inv and Bank Of New, you can compare the effects of market volatilities on Diamond Hill and Bank of New York 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 New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Bank of New York.

Diversification Opportunities for Diamond Hill and Bank of New York

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Diamond and Bank of New York is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Inv and Bank Of New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of New York 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 Inv are associated (or correlated) with Bank of New York. 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 New York has no effect on the direction of Diamond Hill i.e., Diamond Hill and Bank of New York go up and down completely randomly.

Pair Corralation between Diamond Hill and Bank of New York

Given the investment horizon of 90 days Diamond Hill Inv is expected to generate 0.97 times more return on investment than Bank of New York. However, Diamond Hill Inv is 1.03 times less risky than Bank of New York. It trades about 0.07 of its potential returns per unit of risk. Bank Of New is currently generating about 0.03 per unit of risk. If you would invest  10,062  in Diamond Hill Inv on April 7, 2022 and sell it today you would earn a total of  7,668  from holding Diamond Hill Inv or generate 76.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Diamond Hill Inv  vs.  Bank Of New

 Performance (%) 
      Timeline 
Diamond Hill Inv 
Diamond Performance
0 of 100
Over the last 90 days Diamond Hill Inv has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady forward indicators, Diamond Hill is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Diamond Price Channel

Bank of New York 
Bank of New York Performance
0 of 100
Over the last 90 days Bank Of New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest sluggish performance, the Stock's forward-looking signals remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Bank of New York Price Channel

Diamond Hill and Bank of New York Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Diamond Hill and Bank of New York

The main advantage of trading using opposite Diamond Hill and Bank of New York positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Bank of New York 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 New York will offset losses from the drop in Bank of New York's long position.
The idea behind Diamond Hill Inv and Bank Of New 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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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