Correlation Between Needham Aggressive and Ultrashort Small-cap

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

Diversification Opportunities for Needham Aggressive and Ultrashort Small-cap

-0.66

Correlation Coefficient

Needham Aggressive  Ultrashort Small-cap

Excellent diversification

The 3 months correlation between Needham and Ultrashort is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Needham Aggressive Growth and Ultrashort Small Cap Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort 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 Ultrashort Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Small Cap has no effect on the direction of Needham Aggressive i.e., Needham Aggressive and Ultrashort Small-cap go up and down completely randomly.

Pair Corralation between Needham Aggressive and Ultrashort Small-cap

Assuming the 90 days horizon Needham Aggressive Growth is expected to under-perform the Ultrashort Small-cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Needham Aggressive Growth is 2.39 times less risky than Ultrashort Small-cap. The mutual fund trades about -0.22 of its potential returns per unit of risk. The Ultrashort Small Cap Profund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,186  in Ultrashort Small Cap Profund on October 6, 2024 and sell it today you would earn a total of  285.00  from holding Ultrashort Small Cap Profund or generate 6.81% return on investment over 90 days.

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

Needham Aggressive Growth  vs.  Ultrashort Small Cap Profund

Needham Aggressive Growth

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Aggressive Growth are ranked lower than 1 (%) 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.

Ultrashort Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultrashort Small Cap Profund 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 Needham Aggressive and Ultrashort Small-cap

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

The idea behind Needham Aggressive Growth and Ultrashort Small Cap Profund 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.