Correlation Between Invesco California and Diamond Hill

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

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

Diversification Opportunities for Invesco California and Diamond Hill

0.79

Correlation Coefficient

Invesco California  Diamond Hill

Poor diversification

The 3 months correlation between Invesco and Diamond is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Invesco California Value 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 Invesco California 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 Invesco California Value 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 Invesco California i.e., Invesco California and Diamond Hill go up and down completely randomly.

Pair Corralation between Invesco California and Diamond Hill

Considering the 90-day investment horizon Invesco California Value is expected to under-perform the Diamond Hill. But the stock apears to be less risky and, when comparing its historical volatility, Invesco California Value is 1.4 times less risky than Diamond Hill. The stock trades about -0.09 of its potential returns per unit of risk. The Diamond Hill Investment is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  14,614  in Diamond Hill Investment on March 1, 2025 and sell it today you would lose (327.00) from holding Diamond Hill Investment or give up 2.24% of portfolio value over 90 days.

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

Invesco California Value  vs.  Diamond Hill Investment

Invesco California Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco California Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Diamond Hill Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamond Hill Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Diamond Hill is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Invesco California and Diamond Hill

The main advantage of trading using opposite Invesco California and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco California 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 Invesco California Value 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.