Correlation Between Needham Small and Amer Beacon
Can any of the company-specific risk be diversified away by investing in both Needham Small and Amer Beacon 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 Needham Small and Amer Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Needham Small Cap and Amer Beacon Ark, you can compare the effects of market volatilities on Needham Small and Amer Beacon 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 Needham Small with a short position of Amer Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Small and Amer Beacon.
Diversification Opportunities for Needham Small and Amer Beacon
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Needham and Amer is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Amer Beacon Ark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amer Beacon Ark and Needham Small 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 Needham Small Cap are associated (or correlated) with Amer Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amer Beacon Ark has no effect on the direction of Needham Small i.e., Needham Small and Amer Beacon go up and down completely randomly.
Pair Corralation between Needham Small and Amer Beacon
Assuming the 90 days horizon Needham Small is expected to generate 4.53 times less return on investment than Amer Beacon. But when comparing it to its historical volatility, Needham Small Cap is 1.69 times less risky than Amer Beacon. It trades about 0.09 of its potential returns per unit of risk. Amer Beacon Ark is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,299 in Amer Beacon Ark on August 29, 2024 and sell it today you would earn a total of 205.00 from holding Amer Beacon Ark or generate 15.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Needham Small Cap vs. Amer Beacon Ark
Performance |
| Timeline |
| Needham Small Cap |
| Amer Beacon Ark |
Needham Small and Amer Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Needham Small and Amer Beacon
The main advantage of trading using opposite Needham Small and Amer Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Small position performs unexpectedly, Amer Beacon 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 Amer Beacon will offset losses from the drop in Amer Beacon's long position.| Needham Small vs. Putnam Equity Income | Needham Small vs. Putnam Growth Opportunities | Needham Small vs. HUMANA INC | Needham Small vs. Aquagold International |
| Amer Beacon vs. Ridgeworth Innovative Growth | Amer Beacon vs. Mid Cap Growth | Amer Beacon vs. Small Pany Growth | Amer Beacon vs. Morgan Stanley Multi |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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