Correlation Between Heartland Value and Boston Partners

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

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

Diversification Opportunities for Heartland Value and Boston Partners

0.99

Correlation Coefficient

Heartland Value  Boston Partners

No risk reduction

The 3 months correlation between Heartland and Boston is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Fund and Boston Partners Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Partners Small and Heartland Value 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 Heartland Value Fund are associated (or correlated) with Boston Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Partners Small has no effect on the direction of Heartland Value i.e., Heartland Value and Boston Partners go up and down completely randomly.

Pair Corralation between Heartland Value and Boston Partners

Assuming the 90 days horizon Heartland Value Fund is expected to generate 1.07 times more return on investment than Boston Partners. However, Heartland Value is 1.07 times more volatile than Boston Partners Small. It trades about -0.07 of its potential returns per unit of risk. Boston Partners Small is currently generating about -0.08 per unit of risk. If you would invest  4,757  in Heartland Value Fund on December 30, 2024 and sell it today you would lose (249.00) from holding Heartland Value Fund or give up 5.23% of portfolio value over 90 days.

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

Heartland Value Fund  vs.  Boston Partners Small

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.

Boston Partners Small

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Heartland Value and Boston Partners

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

The idea behind Heartland Value Fund and Boston Partners Small 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.