Correlation Between Midcap Fund and Needham Growth

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Can any of the company-specific risk be diversified away by investing in both Midcap Fund and Needham Growth 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 Midcap Fund and Needham Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Midcap Fund Institutional and Needham Growth, you can compare the effects of market volatilities on Midcap Fund and Needham Growth 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 Midcap Fund with a short position of Needham Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Fund and Needham Growth.

Diversification Opportunities for Midcap Fund and Needham Growth

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Midcap and Needham is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund Institutional and Needham Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Growth and Midcap Fund 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 Midcap Fund Institutional are associated (or correlated) with Needham Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Needham Growth has no effect on the direction of Midcap Fund i.e., Midcap Fund and Needham Growth go up and down completely randomly.

Pair Corralation between Midcap Fund and Needham Growth

Assuming the 90 days horizon Midcap Fund Institutional is expected to under-perform the Needham Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Midcap Fund Institutional is 1.23 times less risky than Needham Growth. The mutual fund trades about -0.22 of its potential returns per unit of risk. The Needham Growth is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,361  in Needham Growth on September 20, 2024 and sell it today you would earn a total of  120.00  from holding Needham Growth or generate 1.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Midcap Fund Institutional  vs.  Needham Growth

 Performance 
       Timeline  
Midcap Fund Institutional 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Midcap Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Midcap Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Needham Growth 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Needham Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Midcap Fund and Needham Growth Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Midcap Fund and Needham Growth

The main advantage of trading using opposite Midcap Fund and Needham Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Fund position performs unexpectedly, Needham Growth 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 Needham Growth will offset losses from the drop in Needham Growth's long position.
The idea behind Midcap Fund Institutional and Needham Growth 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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