Correlation Between Needham Small and Ab Government

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

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

Diversification Opportunities for Needham Small and Ab Government

0.0

Correlation Coefficient

Needham Small  Ab Government

Pay attention - limited upside

The 3 months correlation between Needham and AEYXX is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Ab Government Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Government Exchange and Needham Small 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 Small Cap are associated (or correlated) with Ab Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Government Exchange has no effect on the direction of Needham Small i.e., Needham Small and Ab Government go up and down completely randomly.

Pair Corralation between Needham Small and Ab Government

Assuming the 90 days horizon Needham Small is expected to generate 124.03 times less return on investment than Ab Government. But when comparing it to its historical volatility, Needham Small Cap is 32.73 times less risky than Ab Government. It trades about 0.03 of its potential returns per unit of risk. Ab Government Exchange is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  409.00  in Ab Government Exchange on October 11, 2024 and sell it today you would lose (309.00) from holding Ab Government Exchange or give up 75.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	52.93%
Values	Daily Returns

Needham Small Cap  vs.  Ab Government Exchange

Needham Small Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Small Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Needham Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Government Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Needham Small Cap and Ab Government Exchange 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.