Correlation Between Federated Institutional and Needham Aggressive
Can any of the company-specific risk be diversified away by investing in both Federated Institutional and Needham Aggressive 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 Federated Institutional and Needham Aggressive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Institutional High and Needham Aggressive Growth, you can compare the effects of market volatilities on Federated Institutional and Needham Aggressive 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 Federated Institutional with a short position of Needham Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Institutional and Needham Aggressive.
Diversification Opportunities for Federated Institutional and Needham Aggressive
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federated and Needham is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Federated Institutional High and Needham Aggressive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Aggressive Growth and Federated Institutional 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 Federated Institutional High are associated (or correlated) with Needham Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Needham Aggressive Growth has no effect on the direction of Federated Institutional i.e., Federated Institutional and Needham Aggressive go up and down completely randomly.
Pair Corralation between Federated Institutional and Needham Aggressive
Assuming the 90 days horizon Federated Institutional is expected to generate 3.12 times less return on investment than Needham Aggressive. But when comparing it to its historical volatility, Federated Institutional High is 4.38 times less risky than Needham Aggressive. It trades about 0.11 of its potential returns per unit of risk. Needham Aggressive Growth is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,190 in Needham Aggressive Growth on September 3, 2024 and sell it today you would earn a total of 1,904 from holding Needham Aggressive Growth or generate 59.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Institutional High vs. Needham Aggressive Growth
Performance |
| Timeline |
| Federated Institutional |
| Needham Aggressive Growth |
Federated Institutional and Needham Aggressive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Institutional and Needham Aggressive
The main advantage of trading using opposite Federated Institutional and Needham Aggressive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Institutional position performs unexpectedly, Needham Aggressive 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 Aggressive will offset losses from the drop in Needham Aggressive's long position.The idea behind Federated Institutional High and Needham Aggressive Growth 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 Aggressive vs. Needham Aggressive Growth | Needham Aggressive vs. Needham Small Cap | Needham Aggressive vs. Ultramid Cap Profund Ultramid Cap | Needham Aggressive vs. Fidelity Advisor Semiconductors |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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