Correlation Between Needham Small and Gmo International
Can any of the company-specific risk be diversified away by investing in both Needham Small and Gmo International 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 Gmo International 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 Gmo International Equity, you can compare the effects of market volatilities on Needham Small and Gmo International 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 Gmo International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Small and Gmo International.
Diversification Opportunities for Needham Small and Gmo International
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Needham and Gmo is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Gmo International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo International Equity 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 Gmo International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo International Equity has no effect on the direction of Needham Small i.e., Needham Small and Gmo International go up and down completely randomly.
Pair Corralation between Needham Small and Gmo International
Assuming the 90 days horizon Needham Small Cap is expected to under-perform the Gmo International. In addition to that, Needham Small is 1.92 times more volatile than Gmo International Equity. It trades about -0.1 of its total potential returns per unit of risk. Gmo International Equity is currently generating about 0.26 per unit of volatility. If you would invest 2,511 in Gmo International Equity on November 7, 2024 and sell it today you would earn a total of 116.00 from holding Gmo International Equity or generate 4.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Needham Small Cap vs. Gmo International Equity
Performance |
| Timeline |
| Needham Small Cap |
| Gmo International Equity |
Needham Small and Gmo International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Needham Small and Gmo International
The main advantage of trading using opposite Needham Small and Gmo International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Small position performs unexpectedly, Gmo International 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 Gmo International will offset losses from the drop in Gmo International'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 |
| Gmo International vs. Gmo Emerging Ntry | Gmo International vs. Gmo Quality Fund | Gmo International vs. Gmo Strategic Opportunities | Gmo International vs. Artisan Global Value |
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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