Correlation Between Needham Small and Touchstone Large
Can any of the company-specific risk be diversified away by investing in both Needham Small and Touchstone Large 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 Touchstone Large 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 Touchstone Large Cap, you can compare the effects of market volatilities on Needham Small and Touchstone Large 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 Touchstone Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Small and Touchstone Large.
Diversification Opportunities for Needham Small and Touchstone Large
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Needham and Touchstone is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Touchstone Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Large 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 Touchstone Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Large Cap has no effect on the direction of Needham Small i.e., Needham Small and Touchstone Large go up and down completely randomly.
Pair Corralation between Needham Small and Touchstone Large
Assuming the 90 days horizon Needham Small Cap is expected to generate 1.73 times more return on investment than Touchstone Large. However, Needham Small is 1.73 times more volatile than Touchstone Large Cap. It trades about -0.01 of its potential returns per unit of risk. Touchstone Large Cap is currently generating about -0.34 per unit of risk. If you would invest 1,853 in Needham Small Cap on September 22, 2024 and sell it today you would lose (12.00) from holding Needham Small Cap or give up 0.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Needham Small Cap vs. Touchstone Large Cap
Performance |
| Timeline |
| Needham Small Cap |
| Touchstone Large Cap |
Needham Small and Touchstone Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Needham Small and Touchstone Large
The main advantage of trading using opposite Needham Small and Touchstone Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Small position performs unexpectedly, Touchstone Large 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 Touchstone Large will offset losses from the drop in Touchstone Large'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 |
| Touchstone Large vs. Df Dent Small | Touchstone Large vs. Needham Small Cap | Touchstone Large vs. Praxis Small Cap | Touchstone Large vs. Ab 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |