Correlation Between Heartland Value and Putnam Small

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

Diversification Opportunities for Heartland Value and Putnam Small

0.99

Correlation Coefficient

Heartland Value  Putnam Small

No risk reduction

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

Pair Corralation between Heartland Value and Putnam Small

Assuming the 90 days horizon Heartland Value Fund is expected to generate 1.01 times more return on investment than Putnam Small. However, Heartland Value is 1.01 times more volatile than Putnam Small Cap. It trades about -0.07 of its potential returns per unit of risk. Putnam Small Cap is currently generating about -0.09 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.  Putnam Small Cap

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.

Putnam Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Putnam Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Heartland Value and Putnam Small

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

The idea behind Heartland Value Fund and Putnam Small Cap 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.