Correlation Between Needham Small and Via Renewables

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

Diversification Opportunities for Needham Small and Via Renewables

0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Needham and Via is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Via Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Via Renewables 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 Via Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Via Renewables has no effect on the direction of Needham Small i.e., Needham Small and Via Renewables go up and down completely randomly.

Pair Corralation between Needham Small and Via Renewables

Assuming the 90 days horizon Needham Small is expected to generate 1.75 times less return on investment than Via Renewables. In addition to that, Needham Small is 2.02 times more volatile than Via Renewables. It trades about 0.08 of its total potential returns per unit of risk. Via Renewables is currently generating about 0.27 per unit of volatility. If you would invest  2,237  in Via Renewables on September 20, 2024 and sell it today you would earn a total of  103.00  from holding Via Renewables or generate 4.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Needham Small Cap  vs.  Via Renewables

 Performance 
       Timeline  
Needham Small Cap 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Needham Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Needham Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Via Renewables 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Via Renewables may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Needham Small and Via Renewables Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Needham Small and Via Renewables

The main advantage of trading using opposite Needham Small and Via Renewables positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Small position performs unexpectedly, Via Renewables 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 Via Renewables will offset losses from the drop in Via Renewables' long position.
The idea behind Needham Small Cap and Via Renewables 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.
Check out your portfolio center.
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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