Correlation Between Heartland Value and Multifactor Equity

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

Diversification Opportunities for Heartland Value and Multifactor Equity

0.9

Correlation Coefficient

Heartland Value  Multifactor Equity

Almost no diversification

The 3 months correlation between Heartland and Multifactor is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Plus and Multifactor Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multifactor Equity 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 Multifactor Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multifactor Equity has no effect on the direction of Heartland Value i.e., Heartland Value and Multifactor Equity go up and down completely randomly.

Pair Corralation between Heartland Value and Multifactor Equity

Assuming the 90 days horizon Heartland Value is expected to generate 4.84 times less return on investment than Multifactor Equity. In addition to that, Heartland Value is 1.39 times more volatile than Multifactor Equity Fund. It trades about 0.01 of its total potential returns per unit of risk. Multifactor Equity Fund is currently generating about 0.1 per unit of volatility. If you would invest  1,442  in Multifactor Equity Fund on September 4, 2024 and sell it today you would earn a total of  642.00  from holding Multifactor Equity Fund or generate 44.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.79%
Values	Daily Returns

Heartland Value Plus  vs.  Multifactor Equity Fund

Heartland Value Plus

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Value Plus are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Heartland Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Multifactor Equity

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multifactor Equity Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Multifactor Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Heartland Value and Multifactor Equity

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

The idea behind Heartland Value Plus and Multifactor Equity Fund 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.