Correlation Between Heartland Value and Inverse Russell

Can any of the company-specific risk be diversified away by investing in both Heartland Value and Inverse Russell 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 Inverse Russell 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 Inverse Russell 2000, you can compare the effects of market volatilities on Heartland Value and Inverse Russell 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 Inverse Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heartland Value and Inverse Russell.

Diversification Opportunities for Heartland Value and Inverse Russell

-0.83

Correlation Coefficient

Heartland Value  Inverse Russell

Pay attention - limited upside

The 3 months correlation between Heartland and Inverse is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Plus and Inverse Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Russell 2000 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 Inverse Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Russell 2000 has no effect on the direction of Heartland Value i.e., Heartland Value and Inverse Russell go up and down completely randomly.

Pair Corralation between Heartland Value and Inverse Russell

Assuming the 90 days horizon Heartland Value Plus is expected to under-perform the Inverse Russell. But the mutual fund apears to be less risky and, when comparing its historical volatility, Heartland Value Plus is 2.13 times less risky than Inverse Russell. The mutual fund trades about -0.49 of its potential returns per unit of risk. The Inverse Russell 2000 is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  569.00  in Inverse Russell 2000 on September 30, 2024 and sell it today you would earn a total of  66.00  from holding Inverse Russell 2000 or generate 11.6% return on investment over 90 days.

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

Heartland Value Plus  vs.  Inverse Russell 2000

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.

Inverse Russell 2000

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inverse Russell 2000 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Inverse Russell 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 Inverse Russell

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

The idea behind Heartland Value Plus and Inverse Russell 2000 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 Anywhere module to track or share privately all of your investments from the convenience of any device.