Correlation Between Needham Small and Madison International
Can any of the company-specific risk be diversified away by investing in both Needham Small and Madison 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 Madison 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 Madison International Stock, you can compare the effects of market volatilities on Needham Small and Madison 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 Madison International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Small and Madison International.
Diversification Opportunities for Needham Small and Madison International
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Needham and Madison is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Madison International Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison International 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 Madison International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison International has no effect on the direction of Needham Small i.e., Needham Small and Madison International go up and down completely randomly.
Pair Corralation between Needham Small and Madison International
Assuming the 90 days horizon Needham Small Cap is expected to generate 1.86 times more return on investment than Madison International. However, Needham Small is 1.86 times more volatile than Madison International Stock. It trades about 0.04 of its potential returns per unit of risk. Madison International Stock is currently generating about 0.01 per unit of risk. If you would invest 1,866 in Needham Small Cap on October 25, 2024 and sell it today you would earn a total of 110.00 from holding Needham Small Cap or generate 5.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Needham Small Cap vs. Madison International Stock
Performance |
| Timeline |
| Needham Small Cap |
| Madison International |
Needham Small and Madison International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Needham Small and Madison International
The main advantage of trading using opposite Needham Small and Madison International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Small position performs unexpectedly, Madison 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 Madison International will offset losses from the drop in Madison 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 |
| Madison International vs. Rbb Fund | Madison International vs. Small Pany Growth | Madison International vs. Arrow Managed Futures | Madison International vs. Astoncrosswind Small Cap |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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