Correlation Between Heartland Value and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Heartland Value and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Heartland Value and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heartland Value and Dow Jones.
Diversification Opportunities for Heartland Value and Dow Jones
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Heartland and Dow is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Plus and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Heartland Value i.e., Heartland Value and Dow Jones go up and down completely randomly.
Pair Corralation between Heartland Value and Dow Jones
Assuming the 90 days horizon Heartland Value is expected to generate 2.87 times less return on investment than Dow Jones. In addition to that, Heartland Value is 1.57 times more volatile than Dow Jones Industrial. It trades about 0.02 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of volatility. If you would invest 3,394,710 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 1,034,941 from holding Dow Jones Industrial or generate 30.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Heartland Value Plus vs. Dow Jones Industrial
Performance |
| Timeline |
Heartland Value and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Heartland Value Plus
Pair trading matchups for Heartland Value
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Heartland Value and Dow Jones
The main advantage of trading using opposite Heartland Value and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heartland Value position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Heartland Value vs. Lkcm Small Mid Cap | Heartland Value vs. Precious Metals And | Heartland Value vs. American Beacon International | Heartland Value vs. Hotchkis Wiley Small |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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