Correlation Between Heartland Value and Federated International

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

Diversification Opportunities for Heartland Value and Federated International

-0.59

Correlation Coefficient

Heartland Value  Federated International

Excellent diversification

The 3 months correlation between Heartland and FEDERATED is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Plus and Federated International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated International 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 Federated International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated International has no effect on the direction of Heartland Value i.e., Heartland Value and Federated International go up and down completely randomly.

Pair Corralation between Heartland Value and Federated International

Assuming the 90 days horizon Heartland Value Plus is expected to under-perform the Federated International. In addition to that, Heartland Value is 1.17 times more volatile than Federated International Small Mid. It trades about -0.11 of its total potential returns per unit of risk. Federated International Small Mid is currently generating about 0.17 per unit of volatility. If you would invest  3,852  in Federated International Small Mid on December 23, 2024 and sell it today you would earn a total of  402.00  from holding Federated International Small Mid or generate 10.44% return on investment over 90 days.

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

Heartland Value Plus  vs.  Federated International Small

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.

Federated International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated International Small Mid are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Federated International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Heartland Value and Federated International

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

The idea behind Heartland Value Plus and Federated International Small Mid 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.