Correlation Between Heritage Fund and Huber Capital

Can any of the company-specific risk be diversified away by investing in both Heritage Fund and Huber Capital 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 Heritage Fund and Huber Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heritage Fund A and Huber Capital Equity, you can compare the effects of market volatilities on Heritage Fund and Huber Capital 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 Heritage Fund with a short position of Huber Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heritage Fund and Huber Capital.

Diversification Opportunities for Heritage Fund and Huber Capital

0.6

Correlation Coefficient

Heritage Fund  Huber Capital

Poor diversification

The 3 months correlation between Heritage and Huber is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Fund A and Huber Capital Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huber Capital Equity and Heritage Fund 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 Heritage Fund A are associated (or correlated) with Huber Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huber Capital Equity has no effect on the direction of Heritage Fund i.e., Heritage Fund and Huber Capital go up and down completely randomly.

Pair Corralation between Heritage Fund and Huber Capital

Assuming the 90 days horizon Heritage Fund A is expected to under-perform the Huber Capital. In addition to that, Heritage Fund is 1.92 times more volatile than Huber Capital Equity. It trades about -0.01 of its total potential returns per unit of risk. Huber Capital Equity is currently generating about 0.08 per unit of volatility. If you would invest  3,274  in Huber Capital Equity on December 2, 2024 and sell it today you would earn a total of  64.00  from holding Huber Capital Equity or generate 1.95% return on investment over 90 days.

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

Heritage Fund A  vs.  Huber Capital Equity

Heritage Fund A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heritage Fund A has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Huber Capital Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huber Capital Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Huber Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Heritage Fund and Huber Capital

The main advantage of trading using opposite Heritage Fund and Huber Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heritage Fund position performs unexpectedly, Huber Capital 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 Huber Capital will offset losses from the drop in Huber Capital's long position.

The idea behind Heritage Fund A and Huber Capital Equity 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.