Correlation Between Heartland Value and Virtus Kar

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

Diversification Opportunities for Heartland Value and Virtus Kar

0.91

Correlation Coefficient

Heartland Value  Virtus Kar

Almost no diversification

The 3 months correlation between Heartland and Virtus is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Value Plus and Virtus Kar Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Kar Small 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 Virtus Kar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Kar Small has no effect on the direction of Heartland Value i.e., Heartland Value and Virtus Kar go up and down completely randomly.

Pair Corralation between Heartland Value and Virtus Kar

Assuming the 90 days horizon Heartland Value is expected to generate 2.68 times less return on investment than Virtus Kar. But when comparing it to its historical volatility, Heartland Value Plus is 1.14 times less risky than Virtus Kar. It trades about 0.01 of its potential returns per unit of risk. Virtus Kar Small Cap is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,147  in Virtus Kar Small Cap on October 5, 2024 and sell it today you would earn a total of  162.00  from holding Virtus Kar Small Cap or generate 5.15% return on investment over 90 days.

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

Heartland Value Plus  vs.  Virtus Kar 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.

Virtus Kar Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus Kar Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Heartland Value and Virtus Kar

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

The idea behind Heartland Value Plus and Virtus Kar 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.