Correlation Between Baron Opportunity and Needham Growth

Can any of the company-specific risk be diversified away by investing in both Baron Opportunity and Needham Growth 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 Baron Opportunity and Needham Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Baron Opportunity Fund and Needham Growth Fund, you can compare the effects of market volatilities on Baron Opportunity and Needham Growth 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 Baron Opportunity with a short position of Needham Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Opportunity and Needham Growth.

Diversification Opportunities for Baron Opportunity and Needham Growth

-0.5

Correlation Coefficient

Baron Opportunity  Needham Growth

Very good diversification

The 3 months correlation between Baron and Needham is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Baron Opportunity Fund and Needham Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Growth and Baron Opportunity 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 Baron Opportunity Fund are associated (or correlated) with Needham Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Needham Growth has no effect on the direction of Baron Opportunity i.e., Baron Opportunity and Needham Growth go up and down completely randomly.

Pair Corralation between Baron Opportunity and Needham Growth

Assuming the 90 days horizon Baron Opportunity is expected to generate 5.57 times less return on investment than Needham Growth. In addition to that, Baron Opportunity is 1.3 times more volatile than Needham Growth Fund. It trades about 0.03 of its total potential returns per unit of risk. Needham Growth Fund is currently generating about 0.24 per unit of volatility. If you would invest  5,975  in Needham Growth Fund on September 19, 2024 and sell it today you would earn a total of  421.00  from holding Needham Growth Fund or generate 7.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Baron Opportunity Fund  vs.  Needham Growth Fund

Baron Opportunity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Opportunity Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Opportunity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Needham Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Needham Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Needham Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Baron Opportunity and Needham Growth

The main advantage of trading using opposite Baron Opportunity and Needham Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Opportunity position performs unexpectedly, Needham Growth 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 Growth will offset losses from the drop in Needham Growth's long position.

The idea behind Baron Opportunity Fund and Needham Growth Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.