Correlation Between Paradigm Micro-cap and Needham Small
Can any of the company-specific risk be diversified away by investing in both Paradigm Micro-cap and Needham Small 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 Paradigm Micro-cap and Needham Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paradigm Micro Cap Fund and Needham Small Cap, you can compare the effects of market volatilities on Paradigm Micro-cap and Needham Small 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 Paradigm Micro-cap with a short position of Needham Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paradigm Micro-cap and Needham Small.
Diversification Opportunities for Paradigm Micro-cap and Needham Small
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Paradigm and Needham is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Paradigm Micro Cap Fund and Needham Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Small Cap and Paradigm Micro-cap 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 Paradigm Micro Cap Fund are associated (or correlated) with Needham Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Needham Small Cap has no effect on the direction of Paradigm Micro-cap i.e., Paradigm Micro-cap and Needham Small go up and down completely randomly.
Pair Corralation between Paradigm Micro-cap and Needham Small
Assuming the 90 days horizon Paradigm Micro Cap Fund is expected to generate 0.91 times more return on investment than Needham Small. However, Paradigm Micro Cap Fund is 1.1 times less risky than Needham Small. It trades about 0.1 of its potential returns per unit of risk. Needham Small Cap is currently generating about 0.09 per unit of risk. If you would invest 5,776 in Paradigm Micro Cap Fund on August 29, 2024 and sell it today you would earn a total of 200.00 from holding Paradigm Micro Cap Fund or generate 3.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paradigm Micro Cap Fund vs. Needham Small Cap
Performance |
| Timeline |
| Paradigm Micro Cap |
| Needham Small Cap |
Paradigm Micro-cap and Needham Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paradigm Micro-cap and Needham Small
The main advantage of trading using opposite Paradigm Micro-cap and Needham Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paradigm Micro-cap position performs unexpectedly, Needham Small 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 Needham Small will offset losses from the drop in Needham Small's long position.| Paradigm Micro-cap vs. Vanguard Small Cap Index | Paradigm Micro-cap vs. T Rowe Price | Paradigm Micro-cap vs. HUMANA INC | Paradigm Micro-cap vs. Aquagold International |
| Needham Small vs. Putnam Equity Income | Needham Small vs. Putnam Growth Opportunities | Needham Small vs. HUMANA INC | Needham Small vs. Aquagold International |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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