Correlation Between Heartland Value and Western Asset

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

Diversification Opportunities for Heartland Value and Western Asset

0.02

Correlation Coefficient

Heartland Value  Western Asset

Significant diversification

The 3 months correlation between Heartland and Western is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Plus and Western Asset Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Inflation 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Inflation has no effect on the direction of Heartland Value i.e., Heartland Value and Western Asset go up and down completely randomly.

Pair Corralation between Heartland Value and Western Asset

Assuming the 90 days horizon Heartland Value is expected to generate 1.95 times less return on investment than Western Asset. In addition to that, Heartland Value is 2.79 times more volatile than Western Asset Inflation. It trades about 0.0 of its total potential returns per unit of risk. Western Asset Inflation is currently generating about 0.01 per unit of volatility. If you would invest  918.00  in Western Asset Inflation on September 29, 2024 and sell it today you would earn a total of  16.00  from holding Western Asset Inflation or generate 1.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Heartland Value Plus  vs.  Western Asset Inflation

Heartland Value Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heartland Value Plus has generated negative risk-adjusted returns adding no value to fund investors. 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.

Western Asset Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Inflation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Western Asset 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 Western Asset

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

The idea behind Heartland Value Plus and Western Asset Inflation 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.