Correlation Between Needham Small and Paradigm Micro-cap
Can any of the company-specific risk be diversified away by investing in both Needham Small and Paradigm Micro-cap 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 Paradigm Micro-cap 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 Paradigm Micro Cap Fund, you can compare the effects of market volatilities on Needham Small and Paradigm Micro-cap 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 Paradigm Micro-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Small and Paradigm Micro-cap.
Diversification Opportunities for Needham Small and Paradigm Micro-cap
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Needham and Paradigm is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Paradigm Micro Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm Micro Cap 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 Paradigm Micro-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm Micro Cap has no effect on the direction of Needham Small i.e., Needham Small and Paradigm Micro-cap go up and down completely randomly.
Pair Corralation between Needham Small and Paradigm Micro-cap
Assuming the 90 days horizon Needham Small Cap is expected to generate 1.15 times more return on investment than Paradigm Micro-cap. However, Needham Small is 1.15 times more volatile than Paradigm Micro Cap Fund. It trades about 0.23 of its potential returns per unit of risk. Paradigm Micro Cap Fund is currently generating about 0.23 per unit of risk. If you would invest 1,752 in Needham Small Cap on September 1, 2024 and sell it today you would earn a total of 144.00 from holding Needham Small Cap or generate 8.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Needham Small Cap vs. Paradigm Micro Cap Fund
Performance |
| Timeline |
| Needham Small Cap |
| Paradigm Micro Cap |
Needham Small and Paradigm Micro-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Needham Small and Paradigm Micro-cap
The main advantage of trading using opposite Needham Small and Paradigm Micro-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Small position performs unexpectedly, Paradigm Micro-cap 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 Paradigm Micro-cap will offset losses from the drop in Paradigm Micro-cap'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 |
| Paradigm Micro-cap vs. Paradigm Select Fund | Paradigm Micro-cap vs. Needham Aggressive Growth | Paradigm Micro-cap vs. Ultramid Cap Profund Ultramid Cap | Paradigm Micro-cap vs. Towle Deep 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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