Correlation Between Needham Growth and Value Line

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

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

Diversification Opportunities for Needham Growth and Value Line

0.12

Correlation Coefficient

Needham Growth  Value Line

Average diversification

The 3 months correlation between Needham and Value is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Needham Growth Fund and Value Line Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Line Small and Needham Growth 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 Growth Fund are associated (or correlated) with Value Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Line Small has no effect on the direction of Needham Growth i.e., Needham Growth and Value Line go up and down completely randomly.

Pair Corralation between Needham Growth and Value Line

Assuming the 90 days horizon Needham Growth Fund is expected to generate 1.51 times more return on investment than Value Line. However, Needham Growth is 1.51 times more volatile than Value Line Small. It trades about 0.04 of its potential returns per unit of risk. Value Line Small is currently generating about 0.06 per unit of risk. If you would invest  4,763  in Needham Growth Fund on October 12, 2024 and sell it today you would earn a total of  1,562  from holding Needham Growth Fund or generate 32.79% return on investment over 90 days.

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

Needham Growth Fund  vs.  Value Line Small

Needham Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Needham Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Value Line Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Value Line Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Value Line 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 Growth and Value Line

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

The idea behind Needham Growth Fund and Value Line Small 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.