Correlation Between Heartland Value and Sierra Tactical

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

Diversification Opportunities for Heartland Value and Sierra Tactical

-0.03

Correlation Coefficient

Heartland Value  Sierra Tactical

Good diversification

The 3 months correlation between Heartland and Sierra is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Plus and Sierra Tactical Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Tactical Bond 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 Sierra Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Tactical Bond has no effect on the direction of Heartland Value i.e., Heartland Value and Sierra Tactical go up and down completely randomly.

Pair Corralation between Heartland Value and Sierra Tactical

Assuming the 90 days horizon Heartland Value Plus is expected to under-perform the Sierra Tactical. In addition to that, Heartland Value is 5.54 times more volatile than Sierra Tactical Bond. It trades about -0.11 of its total potential returns per unit of risk. Sierra Tactical Bond is currently generating about 0.08 per unit of volatility. If you would invest  2,605  in Sierra Tactical Bond on December 22, 2024 and sell it today you would earn a total of  26.00  from holding Sierra Tactical Bond or generate 1.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Heartland Value Plus  vs.  Sierra Tactical Bond

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.

Sierra Tactical Bond

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sierra Tactical Bond are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Sierra Tactical 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 Sierra Tactical

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

The idea behind Heartland Value Plus and Sierra Tactical Bond 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..