Correlation Between Vanguard Large-cap and Heartland Value

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

By analyzing existing cross correlation between Vanguard Large Cap Index and Heartland Value Fund, you can compare the effects of market volatilities on Vanguard Large-cap 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 Vanguard Large-cap with a short position of Heartland Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Large-cap and Heartland Value.

Diversification Opportunities for Vanguard Large-cap and Heartland Value

0.96

Correlation Coefficient

Vanguard Large-cap  Heartland Value

Almost no diversification

The 3 months correlation between Vanguard and Heartland is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index and Heartland Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Value and Vanguard Large-cap 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 Vanguard Large Cap Index 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 has no effect on the direction of Vanguard Large-cap i.e., Vanguard Large-cap and Heartland Value go up and down completely randomly.

Pair Corralation between Vanguard Large-cap and Heartland Value

Assuming the 90 days horizon Vanguard Large Cap Index is expected to under-perform the Heartland Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Large Cap Index is 1.09 times less risky than Heartland Value. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Heartland Value Fund is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,896  in Heartland Value Fund on December 30, 2024 and sell it today you would lose (254.00) from holding Heartland Value Fund or give up 5.19% of portfolio value over 90 days.

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

Vanguard Large Cap Index  vs.  Heartland Value Fund

Vanguard Large Cap

Risk-Adjusted Performance

Very Weak

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

Heartland Value

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Vanguard Large-cap and Heartland Value

The main advantage of trading using opposite Vanguard Large-cap and Heartland Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Large-cap 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 Vanguard Large Cap Index and Heartland Value 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.