Correlation Between Needham Aggressive and Nationwide Small

Can any of the company-specific risk be diversified away by investing in both Needham Aggressive and Nationwide 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 Needham Aggressive and Nationwide Small 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 Nationwide Small Cap, you can compare the effects of market volatilities on Needham Aggressive and Nationwide 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 Needham Aggressive with a short position of Nationwide Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Aggressive and Nationwide Small.

Diversification Opportunities for Needham Aggressive and Nationwide Small

0.64

Correlation Coefficient

Needham Aggressive  Nationwide Small

Poor diversification

The 3 months correlation between Needham and Nationwide is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Needham Aggressive Growth and Nationwide Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Small Cap 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 Nationwide Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Small Cap has no effect on the direction of Needham Aggressive i.e., Needham Aggressive and Nationwide Small go up and down completely randomly.

Pair Corralation between Needham Aggressive and Nationwide Small

Assuming the 90 days horizon Needham Aggressive Growth is expected to generate 0.94 times more return on investment than Nationwide Small. However, Needham Aggressive Growth is 1.07 times less risky than Nationwide Small. It trades about 0.05 of its potential returns per unit of risk. Nationwide Small Cap is currently generating about -0.01 per unit of risk. If you would invest  4,868  in Needham Aggressive Growth on October 9, 2024 and sell it today you would earn a total of  166.00  from holding Needham Aggressive Growth or generate 3.41% return on investment over 90 days.

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

Needham Aggressive Growth  vs.  Nationwide Small Cap

Needham Aggressive Growth

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Aggressive Growth are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Needham Aggressive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nationwide Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Needham Aggressive and Nationwide Small

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

The idea behind Needham Aggressive Growth and Nationwide 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.