Correlation Between Needham Aggressive and Dfa International

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

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

Diversification Opportunities for Needham Aggressive and Dfa International

-0.46

Correlation Coefficient

Needham Aggressive  Dfa International

Very good diversification

The 3 months correlation between Needham and Dfa is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Needham Aggressive Growth and Dfa International Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa International Real and Needham Aggressive 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 Needham Aggressive Growth are associated (or correlated) with Dfa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa International Real has no effect on the direction of Needham Aggressive i.e., Needham Aggressive and Dfa International go up and down completely randomly.

Pair Corralation between Needham Aggressive and Dfa International

Assuming the 90 days horizon Needham Aggressive Growth is expected to generate 1.22 times more return on investment than Dfa International. However, Needham Aggressive is 1.22 times more volatile than Dfa International Real. It trades about 0.09 of its potential returns per unit of risk. Dfa International Real is currently generating about -0.26 per unit of risk. If you would invest  4,768  in Needham Aggressive Growth on September 13, 2024 and sell it today you would earn a total of  346.00  from holding Needham Aggressive Growth or generate 7.26% return on investment over 90 days.

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

Needham Aggressive Growth  vs.  Dfa International Real

Needham Aggressive Growth

Risk-Adjusted Performance

7 of 100

OK

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

Dfa International Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dfa International Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fragile performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Needham Aggressive and Dfa International

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

The idea behind Needham Aggressive Growth and Dfa International Real 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.