Correlation Between Nasdaq and Needham Growth

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

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

Diversification Opportunities for Nasdaq and Needham Growth

-0.63

Correlation Coefficient

Nasdaq  Needham Growth

Excellent diversification

The 3 months correlation between Nasdaq and Needham is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Needham Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Growth and Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and Needham Growth go up and down completely randomly.

Pair Corralation between Nasdaq and Needham Growth

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Needham Growth. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.39 times less risky than Needham Growth. The stock trades about -0.21 of its potential returns per unit of risk. The Needham Growth is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  6,752  in Needham Growth on September 24, 2024 and sell it today you would lose (281.00) from holding Needham Growth or give up 4.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Nasdaq Inc  vs.  Needham Growth

Nasdaq Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Needham Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Needham Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Nasdaq and Needham Growth

The main advantage of trading using opposite Nasdaq and Needham Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc and Needham Growth 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.