Correlation Between Life Storage and Diamond Hill

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

Diversification Opportunities for Life Storage and Diamond Hill

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between Life Storage and Diamond is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Life Storage and Diamond Hill Inv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Inv and Life Storage 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 Life Storage 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 Inv has no effect on the direction of Life Storage i.e., Life Storage and Diamond Hill go up and down completely randomly.

Pair Corralation between Life Storage and Diamond Hill

Considering the 90-day investment horizon Life Storage is expected to generate 0.89 times more return on investment than Diamond Hill. However, Life Storage is 1.13 times less risky than Diamond Hill. It trades about 0.06 of its potential returns per unit of risk. Diamond Hill Inv is currently generating about 0.05 per unit of risk. If you would invest  7,342  in Life Storage on July 8, 2022 and sell it today you would earn a total of  3,485  from holding Life Storage or generate 47.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Life Storage  vs.  Diamond Hill Inv

 Performance (%) 
       Timeline  
Life Storage 
Life Storage Performance
0 of 100
Over the last 90 days Life Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Life Storage is not utilizing all of its potentials. The new stock price disturbance, may contribute to mid-run losses for the stockholders.

Life Storage Price Channel

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.

Diamond Price Channel

Life Storage and Diamond Hill Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Life Storage and Diamond Hill

The main advantage of trading using opposite Life Storage and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Storage 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.
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The idea behind Life Storage and Diamond Hill Inv 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.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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