Correlation Between American Funds and Heartland Value
Can any of the company-specific risk be diversified away by investing in both American Funds and Heartland Value 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 American Funds and Heartland Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2010 and Heartland Value Plus, you can compare the effects of market volatilities on American Funds and Heartland Value 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 American Funds with a short position of Heartland Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Heartland Value.
Diversification Opportunities for American Funds and Heartland Value
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Heartland is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2010 and Heartland Value Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Value Plus and American Funds 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 American Funds 2010 are associated (or correlated) with Heartland Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Value Plus has no effect on the direction of American Funds i.e., American Funds and Heartland Value go up and down completely randomly.
Pair Corralation between American Funds and Heartland Value
Assuming the 90 days horizon American Funds 2010 is expected to under-perform the Heartland Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Funds 2010 is 1.77 times less risky than Heartland Value. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Heartland Value Plus is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 3,594 in Heartland Value Plus on October 24, 2024 and sell it today you would earn a total of 165.00 from holding Heartland Value Plus or generate 4.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
American Funds 2010 vs. Heartland Value Plus
Performance |
| Timeline |
| American Funds 2010 |
| Heartland Value Plus |
American Funds and Heartland Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Heartland Value
The main advantage of trading using opposite American Funds and Heartland Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Heartland Value 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 Heartland Value will offset losses from the drop in Heartland Value's long position.| American Funds vs. Heartland Value Plus | American Funds vs. Lsv Small Cap | American Funds vs. Valic Company I | American Funds vs. Small Cap Growth Profund |
| Heartland Value vs. Heartland Value Fund | Heartland Value vs. Large Cap Fund | Heartland Value vs. Amg Yacktman Fund | Heartland Value vs. Wasatch Large Cap |
Check out your portfolio center.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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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