Correlation Between Diamond Hill and Blackrock

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Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Blackrock 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 Blackrock 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 Blackrock, you can compare the effects of market volatilities on Diamond Hill and Blackrock 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 Blackrock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Blackrock.

Diversification Opportunities for Diamond Hill and Blackrock

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Diamond and Blackrock is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Inv and Blackrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock 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 Blackrock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock has no effect on the direction of Diamond Hill i.e., Diamond Hill and Blackrock go up and down completely randomly.

Pair Corralation between Diamond Hill and Blackrock

Given the investment horizon of 90 days Diamond Hill Inv is expected to generate 1.08 times more return on investment than Blackrock. However, Diamond Hill is 1.08 times more volatile than Blackrock. It trades about 0.07 of its potential returns per unit of risk. Blackrock is currently generating about 0.02 per unit of risk. If you would invest  9,969  in Diamond Hill Inv on April 6, 2022 and sell it today you would earn a total of  7,695  from holding Diamond Hill Inv or generate 77.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Diamond Hill Inv  vs.  Blackrock

 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 current stock price chaos, may contribute to medium-term losses for the stakeholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0341
Payout Ratio
0.98
Last Split Factor
1:5
Forward Annual Dividend Rate
6.0
Dividend Date
2022-06-17
Ex Dividend Date
2022-06-01
Last Split Date
2001-09-26

Diamond Price Channel

Blackrock 
Blackrock Performance
0 of 100
Over the last 90 days Blackrock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in August 2022. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0317
Payout Ratio
0.44
Last Split Factor
1:1
Forward Annual Dividend Rate
19.52
Dividend Date
2022-06-23
Ex Dividend Date
2022-06-03
Last Split Date
2007-06-05

Blackrock Price Channel

Diamond Hill and Blackrock Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Diamond Hill and Blackrock

The main advantage of trading using opposite Diamond Hill and Blackrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Blackrock 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 Blackrock will offset losses from the drop in Blackrock's long position.
The idea behind Diamond Hill Inv and Blackrock 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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