Correlation Between Heartland Value and State Farm
Can any of the company-specific risk be diversified away by investing in both Heartland Value and State Farm 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 State Farm 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 State Farm Growth, you can compare the effects of market volatilities on Heartland Value and State Farm 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 State Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heartland Value and State Farm.
Diversification Opportunities for Heartland Value and State Farm
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Heartland and State is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Plus and State Farm Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Farm Growth 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 State Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Farm Growth has no effect on the direction of Heartland Value i.e., Heartland Value and State Farm go up and down completely randomly.
Pair Corralation between Heartland Value and State Farm
Assuming the 90 days horizon Heartland Value Plus is expected to generate 1.77 times more return on investment than State Farm. However, Heartland Value is 1.77 times more volatile than State Farm Growth. It trades about 0.11 of its potential returns per unit of risk. State Farm Growth is currently generating about 0.12 per unit of risk. If you would invest 3,699 in Heartland Value Plus on August 28, 2024 and sell it today you would earn a total of 296.00 from holding Heartland Value Plus or generate 8.0% 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. State Farm Growth
Performance |
| Timeline |
| Heartland Value Plus |
| State Farm Growth |
Heartland Value and State Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heartland Value and State Farm
The main advantage of trading using opposite Heartland Value and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heartland Value position performs unexpectedly, State Farm 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 State Farm will offset losses from the drop in State Farm's long position.| Heartland Value vs. Heartland Value Fund | Heartland Value vs. Large Cap Fund | Heartland Value vs. Amg Yacktman Fund | Heartland Value vs. Wasatch Large Cap |
| State Farm vs. Boston Partners Small | State Farm vs. Heartland Value Plus | State Farm vs. Queens Road Small | State Farm vs. Small Cap Value Series |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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