Correlation Between Needham Small and Aggressive Investors
Can any of the company-specific risk be diversified away by investing in both Needham Small and Aggressive Investors 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 Aggressive Investors 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 Aggressive Investors 1, you can compare the effects of market volatilities on Needham Small and Aggressive Investors 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 Aggressive Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Small and Aggressive Investors.
Diversification Opportunities for Needham Small and Aggressive Investors
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Needham and Aggressive is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Aggressive Investors 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Investors 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 Aggressive Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Investors has no effect on the direction of Needham Small i.e., Needham Small and Aggressive Investors go up and down completely randomly.
Pair Corralation between Needham Small and Aggressive Investors
Assuming the 90 days horizon Needham Small is expected to generate 1.96 times less return on investment than Aggressive Investors. In addition to that, Needham Small is 1.59 times more volatile than Aggressive Investors 1. It trades about 0.12 of its total potential returns per unit of risk. Aggressive Investors 1 is currently generating about 0.38 per unit of volatility. If you would invest 9,526 in Aggressive Investors 1 on August 30, 2024 and sell it today you would earn a total of 889.00 from holding Aggressive Investors 1 or generate 9.33% 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. Aggressive Investors 1
Performance |
| Timeline |
| Needham Small Cap |
| Aggressive Investors |
Needham Small and Aggressive Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Needham Small and Aggressive Investors
The main advantage of trading using opposite Needham Small and Aggressive Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Small position performs unexpectedly, Aggressive Investors 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 Aggressive Investors will offset losses from the drop in Aggressive Investors' long position.| Needham Small vs. Putnam Equity Income | Needham Small vs. Putnam Growth Opportunities | Needham Small vs. HUMANA INC | Needham Small vs. Aquagold International |
| Aggressive Investors vs. First Trust Specialty | Aggressive Investors vs. Vanguard Financials Index | Aggressive Investors vs. Financials Ultrasector Profund | Aggressive Investors vs. Goldman Sachs Trust |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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