Correlation Between Needham Small and Federated Mdt

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

Diversification Opportunities for Needham Small and Federated Mdt

-0.02

Correlation Coefficient

Needham Small  Federated Mdt

Good diversification

The 3 months correlation between Needham and Federated is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Federated Mdt Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt Balanced 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 Federated Mdt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mdt Balanced has no effect on the direction of Needham Small i.e., Needham Small and Federated Mdt go up and down completely randomly.

Pair Corralation between Needham Small and Federated Mdt

Assuming the 90 days horizon Needham Small Cap is expected to under-perform the Federated Mdt. In addition to that, Needham Small is 2.14 times more volatile than Federated Mdt Balanced. It trades about -0.14 of its total potential returns per unit of risk. Federated Mdt Balanced is currently generating about -0.24 per unit of volatility. If you would invest  2,180  in Federated Mdt Balanced on October 16, 2024 and sell it today you would lose (72.00) from holding Federated Mdt Balanced or give up 3.3% of portfolio value over 90 days.

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

Needham Small Cap  vs.  Federated Mdt Balanced

Needham Small Cap

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Small Cap are ranked lower than 2 (%) 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.

Federated Mdt Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Mdt Balanced 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.

Pair Trading with Needham Small and Federated Mdt

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

The idea behind Needham Small Cap and Federated Mdt Balanced 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.