Correlation Between Heartland Value and Equity Series

Can any of the company-specific risk be diversified away by investing in both Heartland Value and Equity Series 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 Heartland Value and Equity Series into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heartland Value Plus and Equity Series Class, you can compare the effects of market volatilities on Heartland Value and Equity Series 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 Heartland Value with a short position of Equity Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heartland Value and Equity Series.

Diversification Opportunities for Heartland Value and Equity Series

0.8

Correlation Coefficient

Heartland Value  Equity Series

Very poor diversification

The 3 months correlation between Heartland and Equity is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Plus and Equity Series Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Series Class and Heartland Value 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 Heartland Value Plus are associated (or correlated) with Equity Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Series Class has no effect on the direction of Heartland Value i.e., Heartland Value and Equity Series go up and down completely randomly.

Pair Corralation between Heartland Value and Equity Series

Assuming the 90 days horizon Heartland Value Plus is expected to generate 0.77 times more return on investment than Equity Series. However, Heartland Value Plus is 1.3 times less risky than Equity Series. It trades about 0.09 of its potential returns per unit of risk. Equity Series Class is currently generating about -0.05 per unit of risk. If you would invest  3,695  in Heartland Value Plus on September 16, 2024 and sell it today you would earn a total of  227.00  from holding Heartland Value Plus or generate 6.14% return on investment over 90 days.

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

Heartland Value Plus  vs.  Equity Series Class

Heartland Value Plus

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Value Plus are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Heartland Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Equity Series Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equity Series Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Equity Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Heartland Value and Equity Series

The main advantage of trading using opposite Heartland Value and Equity Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heartland Value position performs unexpectedly, Equity Series 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 Equity Series will offset losses from the drop in Equity Series' long position.

The idea behind Heartland Value Plus and Equity Series Class 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.