Correlation Between Needham Small and Ishares Municipal
Can any of the company-specific risk be diversified away by investing in both Needham Small and Ishares Municipal 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 Ishares Municipal 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 Ishares Municipal Bond, you can compare the effects of market volatilities on Needham Small and Ishares Municipal 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 Ishares Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Small and Ishares Municipal.
Diversification Opportunities for Needham Small and Ishares Municipal
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Needham and Ishares is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Ishares Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares Municipal Bond 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 Ishares Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares Municipal Bond has no effect on the direction of Needham Small i.e., Needham Small and Ishares Municipal go up and down completely randomly.
Pair Corralation between Needham Small and Ishares Municipal
Assuming the 90 days horizon Needham Small Cap is expected to generate 6.59 times more return on investment than Ishares Municipal. However, Needham Small is 6.59 times more volatile than Ishares Municipal Bond. It trades about 0.02 of its potential returns per unit of risk. Ishares Municipal Bond is currently generating about 0.03 per unit of risk. If you would invest 1,717 in Needham Small Cap on October 13, 2024 and sell it today you would earn a total of 162.00 from holding Needham Small Cap or generate 9.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Needham Small Cap vs. Ishares Municipal Bond
Performance |
| Timeline |
| Needham Small Cap |
| Ishares Municipal Bond |
Needham Small and Ishares Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Needham Small and Ishares Municipal
The main advantage of trading using opposite Needham Small and Ishares Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Small position performs unexpectedly, Ishares Municipal 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 Ishares Municipal will offset losses from the drop in Ishares Municipal's long position.| Needham Small vs. Needham Aggressive Growth | Needham Small vs. Needham Growth Fund | Needham Small vs. Baron Opportunity Fund | Needham Small vs. Jacob Micro Cap |
| Ishares Municipal vs. Franklin Small Cap | Ishares Municipal vs. Needham Small Cap | Ishares Municipal vs. Lebenthal Lisanti Small | Ishares Municipal vs. Vy Columbia Small |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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