Correlation Between Heartland Value and Laudus International

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

Diversification Opportunities for Heartland Value and Laudus International

-0.53

Correlation Coefficient

Heartland Value  Laudus International

Excellent diversification

The 3 months correlation between Heartland and Laudus is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Plus and Laudus International Marketmas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laudus 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 Laudus International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laudus International has no effect on the direction of Heartland Value i.e., Heartland Value and Laudus International go up and down completely randomly.

Pair Corralation between Heartland Value and Laudus International

Assuming the 90 days horizon Heartland Value Plus is expected to generate 1.48 times more return on investment than Laudus International. However, Heartland Value is 1.48 times more volatile than Laudus International Marketmasters. It trades about 0.1 of its potential returns per unit of risk. Laudus International Marketmasters is currently generating about -0.01 per unit of risk. If you would invest  3,695  in Heartland Value Plus on September 14, 2024 and sell it today you would earn a total of  274.00  from holding Heartland Value Plus or generate 7.42% 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.  Laudus International Marketmas

Heartland Value Plus

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Value Plus are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Heartland Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Laudus International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laudus International Marketmasters has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Laudus International 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 Laudus International

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

The idea behind Heartland Value Plus and Laudus International Marketmasters 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.