Correlation Between Pax Large and Heartland Value
Can any of the company-specific risk be diversified away by investing in both Pax Large 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 Pax Large and Heartland Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pax Large Cap and Heartland Value Plus, you can compare the effects of market volatilities on Pax Large 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 Pax Large with a short position of Heartland Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pax Large and Heartland Value.
Diversification Opportunities for Pax Large and Heartland Value
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pax and Heartland is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Pax Large Cap 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 Pax Large 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 Pax Large Cap 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 Pax Large i.e., Pax Large and Heartland Value go up and down completely randomly.
Pair Corralation between Pax Large and Heartland Value
Assuming the 90 days horizon Pax Large is expected to generate 2.13 times less return on investment than Heartland Value. But when comparing it to its historical volatility, Pax Large Cap is 1.65 times less risky than Heartland Value. It trades about 0.11 of its potential returns per unit of risk. Heartland Value Plus is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,594 in Heartland Value Plus on September 12, 2024 and sell it today you would earn a total of 381.00 from holding Heartland Value Plus or generate 10.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pax Large Cap vs. Heartland Value Plus
Performance |
| Timeline |
| Pax Large Cap |
| Heartland Value Plus |
Pax Large and Heartland Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pax Large and Heartland Value
The main advantage of trading using opposite Pax Large and Heartland Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pax Large 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.The idea behind Pax Large Cap and Heartland Value Plus 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.| Heartland Value vs. Vanguard Small Cap Value | Heartland Value vs. Vanguard Small Cap Value | Heartland Value vs. Us Small Cap | Heartland Value vs. Us Targeted Value |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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