Correlation Between Baird Small/mid and Heartland Value

Can any of the company-specific risk be diversified away by investing in both Baird Small/mid 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 Baird Small/mid and Heartland Value into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Baird Smallmid Cap and Heartland Value Plus, you can compare the effects of market volatilities on Baird Small/mid 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 Baird Small/mid with a short position of Heartland Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baird Small/mid and Heartland Value.

Diversification Opportunities for Baird Small/mid and Heartland Value

0.6

Correlation Coefficient

Baird Small/mid  Heartland Value

Poor diversification

The 3 months correlation between Baird and Heartland is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Baird Smallmid 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 Baird Small/mid 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 Baird Smallmid 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 Baird Small/mid i.e., Baird Small/mid and Heartland Value go up and down completely randomly.

Pair Corralation between Baird Small/mid and Heartland Value

Assuming the 90 days horizon Baird Smallmid Cap is expected to generate 0.79 times more return on investment than Heartland Value. However, Baird Smallmid Cap is 1.26 times less risky than Heartland Value. It trades about 0.01 of its potential returns per unit of risk. Heartland Value Plus is currently generating about -0.12 per unit of risk. If you would invest  1,760  in Baird Smallmid Cap on October 22, 2024 and sell it today you would earn a total of  2.00  from holding Baird Smallmid Cap or generate 0.11% return on investment over 90 days.

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

Baird Smallmid Cap  vs.  Heartland Value Plus

Baird Smallmid Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Smallmid Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baird Small/mid may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Heartland Value Plus

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Baird Small/mid and Heartland Value

The main advantage of trading using opposite Baird Small/mid and Heartland Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baird Small/mid 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 Baird Smallmid 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.