Correlation Between Wasatch Large and Heartland Value

Can any of the company-specific risk be diversified away by investing in both Wasatch 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 Wasatch 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 Wasatch Large Cap and Heartland Value Plus, you can compare the effects of market volatilities on Wasatch 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 Wasatch Large with a short position of Heartland Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Large and Heartland Value.

Diversification Opportunities for Wasatch Large and Heartland Value

0.62

Correlation Coefficient

Wasatch Large  Heartland Value

Poor diversification

The 3 months correlation between Wasatch and Heartland is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch 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 Wasatch 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 Wasatch 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 Wasatch Large i.e., Wasatch Large and Heartland Value go up and down completely randomly.

Pair Corralation between Wasatch Large and Heartland Value

Assuming the 90 days horizon Wasatch Large Cap is expected to generate 0.6 times more return on investment than Heartland Value. However, Wasatch Large Cap is 1.68 times less risky than Heartland Value. It trades about 0.1 of its potential returns per unit of risk. Heartland Value Plus is currently generating about 0.03 per unit of risk. If you would invest  730.00  in Wasatch Large Cap on June 23, 2024 and sell it today you would earn a total of  285.00  from holding Wasatch Large Cap or generate 39.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Wasatch Large Cap  vs.  Heartland Value Plus

Wasatch Large Cap

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Large Cap are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Wasatch Large may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Heartland Value Plus

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Value Plus are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Heartland Value may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with Wasatch Large and Heartland Value

The main advantage of trading using opposite Wasatch Large and Heartland Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wasatch 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 Wasatch 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.

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.