Correlation Between Heartland Value and Hennessy Cornerstone

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

Diversification Opportunities for Heartland Value and Hennessy Cornerstone

0.93

Correlation Coefficient

Heartland Value  Hennessy Cornerstone

Almost no diversification

The 3 months correlation between Heartland and Hennessy is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Fund and Hennessy Nerstone Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Growth 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 Cornerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Growth has no effect on the direction of Heartland Value i.e., Heartland Value and Hennessy Cornerstone go up and down completely randomly.

Pair Corralation between Heartland Value and Hennessy Cornerstone

Assuming the 90 days horizon Heartland Value Fund is expected to under-perform the Hennessy Cornerstone. But the mutual fund apears to be less risky and, when comparing its historical volatility, Heartland Value Fund is 1.31 times less risky than Hennessy Cornerstone. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Hennessy Nerstone Growth is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,172  in Hennessy Nerstone Growth on December 30, 2024 and sell it today you would lose (154.00) from holding Hennessy Nerstone Growth or give up 4.85% 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.  Hennessy Nerstone Growth

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.

Hennessy Nerstone Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hennessy Nerstone Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Hennessy Cornerstone 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 Cornerstone

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

The idea behind Heartland Value Fund and Hennessy Nerstone Growth 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.