Correlation Between Heartland Value and Cardinal Small

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

By analyzing existing cross correlation between Heartland Value Plus and Cardinal Small Cap, you can compare the effects of market volatilities on Heartland Value and Cardinal 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 Cardinal Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heartland Value and Cardinal Small.

Diversification Opportunities for Heartland Value and Cardinal Small

0.38

Correlation Coefficient

Heartland Value  Cardinal Small

Weak diversification

The 3 months correlation between Heartland and Cardinal is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Plus and Cardinal Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal 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 Plus are associated (or correlated) with Cardinal Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Small Cap has no effect on the direction of Heartland Value i.e., Heartland Value and Cardinal Small go up and down completely randomly.

Pair Corralation between Heartland Value and Cardinal Small

Assuming the 90 days horizon Heartland Value Plus is expected to generate 94.83 times more return on investment than Cardinal Small. However, Heartland Value is 94.83 times more volatile than Cardinal Small Cap. It trades about 0.07 of its potential returns per unit of risk. Cardinal Small Cap is currently generating about 0.18 per unit of risk. If you would invest  3,729  in Heartland Value Plus on September 18, 2024 and sell it today you would earn a total of  193.00  from holding Heartland Value Plus or generate 5.18% return on investment over 90 days.

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

Heartland Value Plus  vs.  Cardinal Small Cap

Heartland Value Plus

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Value Plus are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Heartland Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cardinal Small Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Small Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Cardinal Small 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 Cardinal Small

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

The idea behind Heartland Value Plus and Cardinal 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.