Correlation Between Needham Aggressive and Payden Absolute

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

Diversification Opportunities for Needham Aggressive and Payden Absolute

0.61

Correlation Coefficient

Needham Aggressive  Payden Absolute

Poor diversification

The 3 months correlation between Needham and Payden is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Needham Aggressive Growth and Payden Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Absolute Return 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 Payden Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Absolute Return has no effect on the direction of Needham Aggressive i.e., Needham Aggressive and Payden Absolute go up and down completely randomly.

Pair Corralation between Needham Aggressive and Payden Absolute

Assuming the 90 days horizon Needham Aggressive Growth is expected to under-perform the Payden Absolute. In addition to that, Needham Aggressive is 14.27 times more volatile than Payden Absolute Return. It trades about -0.08 of its total potential returns per unit of risk. Payden Absolute Return is currently generating about -0.06 per unit of volatility. If you would invest  949.00  in Payden Absolute Return on October 10, 2024 and sell it today you would lose (1.00) from holding Payden Absolute Return or give up 0.11% of portfolio value over 90 days.

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

Needham Aggressive Growth  vs.  Payden Absolute Return

Needham Aggressive Growth

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Aggressive Growth are ranked lower than 4 (%) 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.

Payden Absolute Return

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Absolute Return are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Payden Absolute is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Needham Aggressive and Payden Absolute

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

The idea behind Needham Aggressive Growth and Payden Absolute Return 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .