Correlation Between Heartland Value and City National

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

Diversification Opportunities for Heartland Value and City National

0.6

Correlation Coefficient

Heartland Value  City National

Poor diversification

The 3 months correlation between Heartland and City is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Plus and City National Rochdale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City National Rochdale 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 City National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City National Rochdale has no effect on the direction of Heartland Value i.e., Heartland Value and City National go up and down completely randomly.

Pair Corralation between Heartland Value and City National

Assuming the 90 days horizon Heartland Value Plus is expected to under-perform the City National. In addition to that, Heartland Value is 13.65 times more volatile than City National Rochdale. It trades about -0.57 of its total potential returns per unit of risk. City National Rochdale is currently generating about 0.03 per unit of volatility. If you would invest  1,976  in City National Rochdale on September 24, 2024 and sell it today you would earn a total of  1.00  from holding City National Rochdale or generate 0.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Heartland Value Plus  vs.  City National Rochdale

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.

City National Rochdale

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in City National Rochdale are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, City National 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 City National

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

The idea behind Heartland Value Plus and City National Rochdale 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.

Check out your portfolio center.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.