Correlation Between Aggressive Investors and Needham Small
Can any of the company-specific risk be diversified away by investing in both Aggressive Investors 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 Aggressive Investors and Needham Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aggressive Investors 1 and Needham Small Cap, you can compare the effects of market volatilities on Aggressive Investors 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 Aggressive Investors with a short position of Needham Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aggressive Investors and Needham Small.
Diversification Opportunities for Aggressive Investors and Needham Small
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aggressive and Needham is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Investors 1 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 Aggressive Investors 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 Aggressive Investors 1 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 Aggressive Investors i.e., Aggressive Investors and Needham Small go up and down completely randomly.
Pair Corralation between Aggressive Investors and Needham Small
Assuming the 90 days horizon Aggressive Investors 1 is expected to generate 0.59 times more return on investment than Needham Small. However, Aggressive Investors 1 is 1.7 times less risky than Needham Small. It trades about 0.12 of its potential returns per unit of risk. Needham Small Cap is currently generating about 0.03 per unit of risk. If you would invest 6,143 in Aggressive Investors 1 on August 30, 2024 and sell it today you would earn a total of 4,272 from holding Aggressive Investors 1 or generate 69.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aggressive Investors 1 vs. Needham Small Cap
Performance |
| Timeline |
| Aggressive Investors |
| Needham Small Cap |
Aggressive Investors and Needham Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aggressive Investors and Needham Small
The main advantage of trading using opposite Aggressive Investors and Needham Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aggressive Investors 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.| Aggressive Investors vs. First Trust Specialty | Aggressive Investors vs. Vanguard Financials Index | Aggressive Investors vs. Financials Ultrasector Profund | Aggressive Investors vs. Goldman Sachs Trust |
| Needham Small vs. Putnam Equity Income | Needham Small vs. Putnam Growth Opportunities | Needham Small vs. HUMANA INC | Needham Small vs. Aquagold International |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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