Correlation Between Thompson Largecap and Needham Small
Can any of the company-specific risk be diversified away by investing in both Thompson Largecap 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 Thompson Largecap and Needham Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thompson Largecap Fund and Needham Small Cap, you can compare the effects of market volatilities on Thompson Largecap 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 Thompson Largecap with a short position of Needham Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thompson Largecap and Needham Small.
Diversification Opportunities for Thompson Largecap and Needham Small
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Thompson and Needham is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Thompson Largecap 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 Thompson Largecap 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 Thompson Largecap 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 Thompson Largecap i.e., Thompson Largecap and Needham Small go up and down completely randomly.
Pair Corralation between Thompson Largecap and Needham Small
Assuming the 90 days horizon Thompson Largecap Fund is expected to generate 0.62 times more return on investment than Needham Small. However, Thompson Largecap Fund is 1.62 times less risky than Needham Small. It trades about 0.07 of its potential returns per unit of risk. Needham Small Cap is currently generating about 0.03 per unit of risk. If you would invest 8,529 in Thompson Largecap Fund on August 30, 2024 and sell it today you would earn a total of 3,058 from holding Thompson Largecap Fund or generate 35.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thompson Largecap Fund vs. Needham Small Cap
Performance |
| Timeline |
| Thompson Largecap |
| Needham Small Cap |
Thompson Largecap and Needham Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thompson Largecap and Needham Small
The main advantage of trading using opposite Thompson Largecap and Needham Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thompson Largecap 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.| Thompson Largecap vs. Clipper Fund Inc | Thompson Largecap vs. Meridian Trarian Fund | Thompson Largecap vs. Meridian Growth Fund | Thompson Largecap vs. Muhlenkamp Fund Institutional |
| 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |