Correlation Between Dreyfus Strategic and Heartland Value

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

By analyzing existing cross correlation between Dreyfus Strategic Value and Heartland Value Fund, you can compare the effects of market volatilities on Dreyfus Strategic 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 Dreyfus Strategic with a short position of Heartland Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Strategic and Heartland Value.

Diversification Opportunities for Dreyfus Strategic and Heartland Value

0.59

Correlation Coefficient

Dreyfus Strategic  Heartland Value

Very weak diversification

The 3 months correlation between Dreyfus and Heartland is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Strategic Value and Heartland Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Value and Dreyfus Strategic 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 Dreyfus Strategic Value 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 has no effect on the direction of Dreyfus Strategic i.e., Dreyfus Strategic and Heartland Value go up and down completely randomly.

Pair Corralation between Dreyfus Strategic and Heartland Value

Assuming the 90 days horizon Dreyfus Strategic Value is expected to generate 0.72 times more return on investment than Heartland Value. However, Dreyfus Strategic Value is 1.38 times less risky than Heartland Value. It trades about 0.04 of its potential returns per unit of risk. Heartland Value Fund is currently generating about -0.07 per unit of risk. If you would invest  4,400  in Dreyfus Strategic Value on December 30, 2024 and sell it today you would earn a total of  86.00  from holding Dreyfus Strategic Value or generate 1.95% return on investment over 90 days.

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

Dreyfus Strategic Value  vs.  Heartland Value Fund

Dreyfus Strategic Value

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Strategic Value are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dreyfus Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Heartland Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heartland Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic 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 Dreyfus Strategic and Heartland Value

The main advantage of trading using opposite Dreyfus Strategic and Heartland Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Strategic 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 Dreyfus Strategic Value and Heartland Value Fund 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.