Correlation Between Heritage Fund and Equity Income

Can any of the company-specific risk be diversified away by investing in both Heritage Fund and Equity Income 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 Heritage Fund and Equity Income into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heritage Fund Investor and Equity Income Fund, you can compare the effects of market volatilities on Heritage Fund and Equity Income 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 Heritage Fund with a short position of Equity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heritage Fund and Equity Income.

Diversification Opportunities for Heritage Fund and Equity Income

0.7

Correlation Coefficient

Heritage Fund  Equity Income

Poor diversification

The 3 months correlation between Heritage and Equity is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Fund Investor and Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Income and Heritage Fund 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 Heritage Fund Investor are associated (or correlated) with Equity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Income has no effect on the direction of Heritage Fund i.e., Heritage Fund and Equity Income go up and down completely randomly.

Pair Corralation between Heritage Fund and Equity Income

Assuming the 90 days horizon Heritage Fund Investor is expected to generate 2.16 times more return on investment than Equity Income. However, Heritage Fund is 2.16 times more volatile than Equity Income Fund. It trades about 0.25 of its potential returns per unit of risk. Equity Income Fund is currently generating about -0.01 per unit of risk. If you would invest  2,488  in Heritage Fund Investor on September 14, 2024 and sell it today you would earn a total of  417.00  from holding Heritage Fund Investor or generate 16.76% return on investment over 90 days.

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

Heritage Fund Investor  vs.  Equity Income Fund

Heritage Fund Investor

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Fund Investor are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Heritage Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Equity Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equity Income Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Equity Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Heritage Fund and Equity Income

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

The idea behind Heritage Fund Investor and Equity Income Fund 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.