Correlation Between Heartland Value and Mairs Power

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

Diversification Opportunities for Heartland Value and Mairs Power

0.94

Correlation Coefficient

Heartland Value  Mairs Power

Almost no diversification

The 3 months correlation between Heartland and Mairs is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Fund and Mairs Power Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mairs Power 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 Mairs Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mairs Power Growth has no effect on the direction of Heartland Value i.e., Heartland Value and Mairs Power go up and down completely randomly.

Pair Corralation between Heartland Value and Mairs Power

Assuming the 90 days horizon Heartland Value Fund is expected to generate 1.42 times more return on investment than Mairs Power. However, Heartland Value is 1.42 times more volatile than Mairs Power Growth. It trades about 0.19 of its potential returns per unit of risk. Mairs Power Growth is currently generating about 0.16 per unit of risk. If you would invest  4,938  in Heartland Value Fund on September 3, 2024 and sell it today you would earn a total of  669.00  from holding Heartland Value Fund or generate 13.55% return on investment over 90 days.

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

Heartland Value Fund  vs.  Mairs Power Growth

Heartland Value

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Value Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Heartland Value showed solid returns over the last few months and may actually be approaching a breakup point.

Mairs Power Growth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mairs Power Growth are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Mairs Power may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Heartland Value and Mairs Power

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

The idea behind Heartland Value Fund and Mairs Power 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.