Correlation Between Heartland Value and Jacob Small

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

Diversification Opportunities for Heartland Value and Jacob Small

0.44

Correlation Coefficient

Heartland Value  Jacob Small

Very weak diversification

The 3 months correlation between Heartland and Jacob is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Plus and Jacob Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacob 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 Jacob Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacob Small Cap has no effect on the direction of Heartland Value i.e., Heartland Value and Jacob Small go up and down completely randomly.

Pair Corralation between Heartland Value and Jacob Small

Assuming the 90 days horizon Heartland Value Plus is expected to under-perform the Jacob Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Heartland Value Plus is 1.62 times less risky than Jacob Small. The mutual fund trades about -0.4 of its potential returns per unit of risk. The Jacob Small Cap is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  2,374  in Jacob Small Cap on October 10, 2024 and sell it today you would lose (172.00) from holding Jacob Small Cap or give up 7.25% of portfolio value over 90 days.

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

Heartland Value Plus  vs.  Jacob Small Cap

Heartland Value Plus

Risk-Adjusted Performance

0 of 100

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 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.

Jacob Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jacob Small Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Jacob Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heartland Value and Jacob Small

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

The idea behind Heartland Value Plus and Jacob 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.