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

-0.35

Correlation Coefficient

Aggressive Investors  Needham Growth

Very good diversification

The 3 months correlation between Aggressive and Needham is -0.35. 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 0.57 times more return on investment than Needham Growth. However, Aggressive Investors 1 is 1.76 times less risky than Needham Growth. It trades about 0.34 of its potential returns per unit of risk. Needham Growth Fund is currently generating about 0.02 per unit of risk. If you would invest  8,722  in Aggressive Investors 1 on September 12, 2024 and sell it today you would earn a total of  1,666  from holding Aggressive Investors 1 or generate 19.1% return on investment over 90 days.

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

Aggressive Investors 1  vs.  Needham Growth Fund

Aggressive Investors

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Investors 1 are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Aggressive Investors showed solid returns over the last few months and may actually be approaching a breakup point.

Needham Growth

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Growth Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. 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 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.