Correlation Between Needham Small and Jacob Forward
Can any of the company-specific risk be diversified away by investing in both Needham Small and Jacob Forward 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 Jacob Forward 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 Jacob Forward ETF, you can compare the effects of market volatilities on Needham Small and Jacob Forward 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 Jacob Forward. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Small and Jacob Forward.
Diversification Opportunities for Needham Small and Jacob Forward
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Needham and Jacob is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Jacob Forward ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacob Forward ETF 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 Jacob Forward. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacob Forward ETF has no effect on the direction of Needham Small i.e., Needham Small and Jacob Forward go up and down completely randomly.
Pair Corralation between Needham Small and Jacob Forward
Assuming the 90 days horizon Needham Small is expected to generate 1.51 times less return on investment than Jacob Forward. But when comparing it to its historical volatility, Needham Small Cap is 1.14 times less risky than Jacob Forward. It trades about 0.04 of its potential returns per unit of risk. Jacob Forward ETF is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 935.00 in Jacob Forward ETF on August 26, 2024 and sell it today you would earn a total of 302.00 from holding Jacob Forward ETF or generate 32.3% 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. Jacob Forward ETF
Performance |
| Timeline |
| Needham Small Cap |
| Jacob Forward ETF |
Needham Small and Jacob Forward Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Needham Small and Jacob Forward
The main advantage of trading using opposite Needham Small and Jacob Forward positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Small position performs unexpectedly, Jacob Forward 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 Jacob Forward will offset losses from the drop in Jacob Forward'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 |
| Jacob Forward vs. Invesco DWA Momentum | Jacob Forward vs. Invesco DWA Developed | Jacob Forward vs. Invesco DWA Emerging | Jacob Forward vs. First Trust 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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