Correlation Between Wells Fargo and Heartland Value

Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Heartland Value 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 Wells Fargo and Heartland Value into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wells Fargo Enterprise and Heartland Value Plus, you can compare the effects of market volatilities on Wells Fargo and Heartland Value 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 Wells Fargo with a short position of Heartland Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Heartland Value.

Diversification Opportunities for Wells Fargo and Heartland Value

0.89

Correlation Coefficient

Wells Fargo  Heartland Value

Very poor diversification

The 3 months correlation between Wells and HEARTLAND is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Enterprise and Heartland Value Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Value Plus and Wells Fargo 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 Wells Fargo Enterprise are associated (or correlated) with Heartland Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Value Plus has no effect on the direction of Wells Fargo i.e., Wells Fargo and Heartland Value go up and down completely randomly.

Pair Corralation between Wells Fargo and Heartland Value

Assuming the 90 days horizon Wells Fargo Enterprise is expected to under-perform the Heartland Value. In addition to that, Wells Fargo is 1.64 times more volatile than Heartland Value Plus. It trades about -0.19 of its total potential returns per unit of risk. Heartland Value Plus is currently generating about -0.21 per unit of volatility. If you would invest  4,011  in Heartland Value Plus on December 4, 2024 and sell it today you would lose (554.00) from holding Heartland Value Plus or give up 13.81% of portfolio value over 90 days.

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

Wells Fargo Enterprise  vs.  Heartland Value Plus

Wells Fargo Enterprise

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wells Fargo Enterprise has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

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 weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Wells Fargo and Heartland Value

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

The idea behind Wells Fargo Enterprise and Heartland Value Plus 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.