Correlation Between Heritage Financial and CACI International

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

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

Diversification Opportunities for Heritage Financial and CACI International

-0.39

Correlation Coefficient

Heritage Financial  CACI International

Very good diversification

The 3 months correlation between Heritage and CACI is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Financial and CACI International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CACI International and Heritage Financial 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 Financial are associated (or correlated) with CACI International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CACI International has no effect on the direction of Heritage Financial i.e., Heritage Financial and CACI International go up and down completely randomly.

Pair Corralation between Heritage Financial and CACI International

Given the investment horizon of 90 days Heritage Financial is expected to generate 1.07 times more return on investment than CACI International. However, Heritage Financial is 1.07 times more volatile than CACI International. It trades about -0.21 of its potential returns per unit of risk. CACI International is currently generating about -0.42 per unit of risk. If you would invest  2,650  in Heritage Financial on September 23, 2024 and sell it today you would lose (213.00) from holding Heritage Financial or give up 8.04% of portfolio value over 90 days.

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

Heritage Financial  vs.  CACI International

Heritage Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Heritage Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

CACI International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CACI International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Heritage Financial and CACI International

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

The idea behind Heritage Financial and CACI International 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.