Correlation Between Diamond Hill and Burford Capital

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

Diversification Opportunities for Diamond Hill and Burford Capital

0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Diamond and Burford is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Inv and Burford Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burford Capital 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 Burford Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burford Capital has no effect on the direction of Diamond Hill i.e., Diamond Hill and Burford Capital go up and down completely randomly.

Pair Corralation between Diamond Hill and Burford Capital

Given the investment horizon of 90 days Diamond Hill Inv is expected to under-perform the Burford Capital. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Hill Inv is 1.41 times less risky than Burford Capital. The stock trades about -0.09 of its potential returns per unit of risk. The Burford Capital is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  925.00  in Burford Capital on April 7, 2022 and sell it today you would earn a total of  28.00  from holding Burford Capital or generate 3.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Diamond Hill Inv  vs.  Burford Capital

 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

Burford Capital 
Burford Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Burford Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Burford Capital is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0125
Forward Annual Dividend Rate
0.12
Dividend Date
2022-06-17
Ex Dividend Date
2022-05-26

Burford Price Channel

Diamond Hill and Burford Capital Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Diamond Hill and Burford Capital

The main advantage of trading using opposite Diamond Hill and Burford Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Burford Capital 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 Burford Capital will offset losses from the drop in Burford Capital's long position.
The idea behind Diamond Hill Inv and Burford Capital 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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