Correlation Between Needham Small and Blackrock Moderate

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

Diversification Opportunities for Needham Small and Blackrock Moderate

-0.11

Correlation Coefficient

Needham Small  Blackrock Moderate

Good diversification

The 3 months correlation between Needham and Blackrock is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Blackrock Moderate Prepared in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Moderate 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 Blackrock Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Moderate has no effect on the direction of Needham Small i.e., Needham Small and Blackrock Moderate go up and down completely randomly.

Pair Corralation between Needham Small and Blackrock Moderate

Assuming the 90 days horizon Needham Small Cap is expected to under-perform the Blackrock Moderate. In addition to that, Needham Small is 4.66 times more volatile than Blackrock Moderate Prepared. It trades about -0.21 of its total potential returns per unit of risk. Blackrock Moderate Prepared is currently generating about -0.02 per unit of volatility. If you would invest  1,304  in Blackrock Moderate Prepared on December 5, 2024 and sell it today you would lose (2.00) from holding Blackrock Moderate Prepared or give up 0.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Needham Small Cap  vs.  Blackrock Moderate Prepared

Needham Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Needham Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Blackrock Moderate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock Moderate Prepared has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Blackrock Moderate 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 Blackrock Moderate

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

The idea behind Needham Small Cap and Blackrock Moderate Prepared 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.