Correlation Between Amg River and Needham Small
Can any of the company-specific risk be diversified away by investing in both Amg River and Needham Small 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 Amg River and Needham Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amg River Road and Needham Small Cap, you can compare the effects of market volatilities on Amg River and Needham Small 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 Amg River with a short position of Needham Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amg River and Needham Small.
Diversification Opportunities for Amg River and Needham Small
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amg and Needham is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Amg River Road and Needham Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Small Cap and Amg River 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 Amg River Road are associated (or correlated) with Needham Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Needham Small Cap has no effect on the direction of Amg River i.e., Amg River and Needham Small go up and down completely randomly.
Pair Corralation between Amg River and Needham Small
Assuming the 90 days horizon Amg River is expected to generate 1.32 times less return on investment than Needham Small. But when comparing it to its historical volatility, Amg River Road is 2.61 times less risky than Needham Small. It trades about 0.31 of its potential returns per unit of risk. Needham Small Cap is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,911 in Needham Small Cap on August 31, 2024 and sell it today you would earn a total of 112.00 from holding Needham Small Cap or generate 5.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amg River Road vs. Needham Small Cap
Performance |
| Timeline |
| Amg River Road |
| Needham Small Cap |
Amg River and Needham Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amg River and Needham Small
The main advantage of trading using opposite Amg River and Needham Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amg River position performs unexpectedly, Needham Small 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 Needham Small will offset losses from the drop in Needham Small's long position.The idea behind Amg River Road and Needham 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.| Needham Small vs. The Hartford Midcap | Needham Small vs. Mfs Emerging Markets | Needham Small vs. Wells Fargo Special | Needham Small vs. Baron Emerging Markets |
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 Stocks Directory module to find actively traded stocks across global markets.
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