Correlation Between Source Capital and Diamond Hill

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

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

Diversification Opportunities for Source Capital and Diamond Hill

-0.85

Correlation Coefficient

Source Capital  Diamond Hill

Pay attention - limited upside

The 3 months correlation between Source and Diamond is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Source Capital Closed 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 Source Capital 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 Source Capital Closed 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 Source Capital i.e., Source Capital and Diamond Hill go up and down completely randomly.

Pair Corralation between Source Capital and Diamond Hill

Considering the 90-day investment horizon Source Capital Closed is expected to generate 0.5 times more return on investment than Diamond Hill. However, Source Capital Closed is 2.01 times less risky than Diamond Hill. It trades about 0.15 of its potential returns per unit of risk. Diamond Hill Investment is currently generating about -0.23 per unit of risk. If you would invest  4,375  in Source Capital Closed on August 26, 2025 and sell it today you would earn a total of  289.00  from holding Source Capital Closed or generate 6.61% return on investment over 90 days.

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

Source Capital Closed  vs.  Diamond Hill Investment

Source Capital Closed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Source Capital Closed are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Source Capital may actually be approaching a critical reversion point that can send shares even higher in December 2025.

Diamond Hill Investment

Risk-Adjusted Performance

Weakest

Over the last 90 days Diamond Hill Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in December 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Source Capital and Diamond Hill

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

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.