Correlation Between Heartland Value and Hennessy Balanced

Can any of the company-specific risk be diversified away by investing in both Heartland Value and Hennessy Balanced 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 Hennessy Balanced 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 Hennessy Balanced Fund, you can compare the effects of market volatilities on Heartland Value and Hennessy Balanced 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 Hennessy Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heartland Value and Hennessy Balanced.

Diversification Opportunities for Heartland Value and Hennessy Balanced

-0.28

Correlation Coefficient

Heartland Value  Hennessy Balanced

Very good diversification

The 3 months correlation between Heartland and Hennessy is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Fund and Hennessy Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Balanced 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 Hennessy Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Balanced has no effect on the direction of Heartland Value i.e., Heartland Value and Hennessy Balanced go up and down completely randomly.

Pair Corralation between Heartland Value and Hennessy Balanced

Assuming the 90 days horizon Heartland Value Fund is expected to generate 3.07 times more return on investment than Hennessy Balanced. However, Heartland Value is 3.07 times more volatile than Hennessy Balanced Fund. It trades about 0.14 of its potential returns per unit of risk. Hennessy Balanced Fund is currently generating about -0.09 per unit of risk. If you would invest  5,023  in Heartland Value Fund on September 14, 2024 and sell it today you would earn a total of  485.00  from holding Heartland Value Fund or generate 9.66% return on investment over 90 days.

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

Heartland Value Fund  vs.  Hennessy Balanced Fund

Heartland Value

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Value Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Heartland Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hennessy Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Balanced Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Hennessy Balanced 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 Hennessy Balanced

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

The idea behind Heartland Value Fund and Hennessy Balanced 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.