Correlation Between Heartland Value and Davis New

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

Diversification Opportunities for Heartland Value and Davis New

0.51

Correlation Coefficient

Heartland Value  Davis New

Very weak diversification

The 3 months correlation between Heartland and Davis is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Plus and Davis New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis New York 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 Davis New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis New York has no effect on the direction of Heartland Value i.e., Heartland Value and Davis New go up and down completely randomly.

Pair Corralation between Heartland Value and Davis New

Assuming the 90 days horizon Heartland Value Plus is expected to under-perform the Davis New. In addition to that, Heartland Value is 1.23 times more volatile than Davis New York. It trades about -0.11 of its total potential returns per unit of risk. Davis New York is currently generating about 0.03 per unit of volatility. If you would invest  2,694  in Davis New York on December 30, 2024 and sell it today you would earn a total of  38.00  from holding Davis New York or generate 1.41% return on investment over 90 days.

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

Heartland Value Plus  vs.  Davis New York

Heartland Value Plus

Risk-Adjusted Performance

Very Weak

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

Davis New York

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Davis New York are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Davis New 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 Davis New

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

The idea behind Heartland Value Plus and Davis New York 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.