Correlation Between Jacob Forward and Needham Small

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

By analyzing existing cross correlation between Jacob Forward ETF and Needham Small Cap, you can compare the effects of market volatilities on Jacob Forward 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 Jacob Forward with a short position of Needham Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jacob Forward and Needham Small.

Diversification Opportunities for Jacob Forward and Needham Small

0.89

Correlation Coefficient

Jacob Forward  Needham Small

Very poor diversification

The 3 months correlation between Jacob and Needham is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Jacob Forward ETF 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 Jacob Forward 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 Jacob Forward ETF 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 Jacob Forward i.e., Jacob Forward and Needham Small go up and down completely randomly.

Pair Corralation between Jacob Forward and Needham Small

Given the investment horizon of 90 days Jacob Forward ETF is expected to generate 1.24 times more return on investment than Needham Small. However, Jacob Forward is 1.24 times more volatile than Needham Small Cap. It trades about 0.14 of its potential returns per unit of risk. Needham Small Cap is currently generating about 0.1 per unit of risk. If you would invest  1,069  in Jacob Forward ETF on September 17, 2024 and sell it today you would earn a total of  183.00  from holding Jacob Forward ETF or generate 17.12% return on investment over 90 days.

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

Jacob Forward ETF  vs.  Needham Small Cap

Jacob Forward ETF

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jacob Forward ETF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Jacob Forward exhibited solid returns over the last few months and may actually be approaching a breakup point.

Needham Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Needham Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Jacob Forward and Needham Small

The main advantage of trading using opposite Jacob Forward and Needham Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jacob Forward 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.

The idea behind Jacob Forward ETF and Needham Small Cap 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.