Correlation Between Needham Aggressive and Kentucky Tax

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Can any of the company-specific risk be diversified away by investing in both Needham Aggressive and Kentucky Tax 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 Kentucky Tax 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 Kentucky Tax Free Income, you can compare the effects of market volatilities on Needham Aggressive and Kentucky Tax 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 Kentucky Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Aggressive and Kentucky Tax.

Diversification Opportunities for Needham Aggressive and Kentucky Tax

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Needham and Kentucky is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Needham Aggressive Growth and Kentucky Tax Free Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kentucky Tax Free 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 Kentucky Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kentucky Tax Free has no effect on the direction of Needham Aggressive i.e., Needham Aggressive and Kentucky Tax go up and down completely randomly.

Pair Corralation between Needham Aggressive and Kentucky Tax

Assuming the 90 days horizon Needham Aggressive Growth is expected to under-perform the Kentucky Tax. In addition to that, Needham Aggressive is 4.92 times more volatile than Kentucky Tax Free Income. It trades about -0.08 of its total potential returns per unit of risk. Kentucky Tax Free Income is currently generating about -0.29 per unit of volatility. If you would invest  730.00  in Kentucky Tax Free Income on October 9, 2024 and sell it today you would lose (11.00) from holding Kentucky Tax Free Income or give up 1.51% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Needham Aggressive Growth  vs.  Kentucky Tax Free Income

 Performance 
       Timeline  
Needham Aggressive Growth 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
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.
Kentucky Tax Free 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Kentucky Tax Free Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Kentucky Tax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Needham Aggressive and Kentucky Tax Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Needham Aggressive and Kentucky Tax

The main advantage of trading using opposite Needham Aggressive and Kentucky Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Aggressive position performs unexpectedly, Kentucky Tax 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 Kentucky Tax will offset losses from the drop in Kentucky Tax's long position.
The idea behind Needham Aggressive Growth and Kentucky Tax Free Income 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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