Correlation Between Needham Small and Bny Mellon

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

Diversification Opportunities for Needham Small and Bny Mellon

0.04

Correlation Coefficient

Needham Small  Bny Mellon

Significant diversification

The 3 months correlation between Needham and Bny is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Bny Mellon Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bny Mellon Income 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 Bny Mellon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bny Mellon Income has no effect on the direction of Needham Small i.e., Needham Small and Bny Mellon go up and down completely randomly.

Pair Corralation between Needham Small and Bny Mellon

Assuming the 90 days horizon Needham Small Cap is expected to under-perform the Bny Mellon. In addition to that, Needham Small is 2.52 times more volatile than Bny Mellon Income. It trades about -0.1 of its total potential returns per unit of risk. Bny Mellon Income is currently generating about 0.07 per unit of volatility. If you would invest  676.00  in Bny Mellon Income on December 20, 2024 and sell it today you would earn a total of  20.00  from holding Bny Mellon Income or generate 2.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Needham Small Cap  vs.  Bny Mellon Income

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 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.

Bny Mellon Income

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bny Mellon Income are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Bny Mellon 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 Bny Mellon

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

The idea behind Needham Small Cap and Bny Mellon Income 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.