Correlation Between Aggressive Investors and Needham Growth

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

By analyzing existing cross correlation between Aggressive Investors 1 and Needham Growth Fund, you can compare the effects of market volatilities on Aggressive Investors 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 Aggressive Investors with a short position of Needham Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aggressive Investors and Needham Growth.

Diversification Opportunities for Aggressive Investors and Needham Growth

0.87

Correlation Coefficient

Aggressive Investors  Needham Growth

Very poor diversification

The 3 months correlation between Aggressive and Needham is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Investors 1 and Needham Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Growth and Aggressive Investors 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 Aggressive Investors 1 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 Aggressive Investors i.e., Aggressive Investors and Needham Growth go up and down completely randomly.

Pair Corralation between Aggressive Investors and Needham Growth

Assuming the 90 days horizon Aggressive Investors 1 is expected to generate 0.78 times more return on investment than Needham Growth. However, Aggressive Investors 1 is 1.28 times less risky than Needham Growth. It trades about -0.07 of its potential returns per unit of risk. Needham Growth Fund is currently generating about -0.14 per unit of risk. If you would invest  9,680  in Aggressive Investors 1 on December 30, 2024 and sell it today you would lose (607.00) from holding Aggressive Investors 1 or give up 6.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Aggressive Investors 1  vs.  Needham Growth Fund

Aggressive Investors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aggressive Investors 1 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Aggressive Investors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Needham Growth

Risk-Adjusted Performance

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 weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Aggressive Investors and Needham Growth

The main advantage of trading using opposite Aggressive Investors and Needham Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aggressive Investors 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 Aggressive Investors 1 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.