Correlation Between Sterling Capital and Needham Growth

Can any of the company-specific risk be diversified away by investing in both Sterling Capital 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 Sterling Capital and Needham Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sterling Capital Stratton and Needham Growth Fund, you can compare the effects of market volatilities on Sterling Capital 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 Sterling Capital with a short position of Needham Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and Needham Growth.

Diversification Opportunities for Sterling Capital and Needham Growth

0.39

Correlation Coefficient

Sterling Capital  Needham Growth

Weak diversification

The 3 months correlation between Sterling and Needham is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Stratton and Needham Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Growth and Sterling Capital 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 Sterling Capital Stratton 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 Sterling Capital i.e., Sterling Capital and Needham Growth go up and down completely randomly.

Pair Corralation between Sterling Capital and Needham Growth

Assuming the 90 days horizon Sterling Capital Stratton is expected to under-perform the Needham Growth. In addition to that, Sterling Capital is 1.29 times more volatile than Needham Growth Fund. It trades about -0.02 of its total potential returns per unit of risk. Needham Growth Fund is currently generating about 0.08 per unit of volatility. If you would invest  4,558  in Needham Growth Fund on October 27, 2024 and sell it today you would earn a total of  1,895  from holding Needham Growth Fund or generate 41.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sterling Capital Stratton  vs.  Needham Growth Fund

Sterling Capital Stratton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sterling Capital Stratton 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 fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Needham Growth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sterling Capital and Needham Growth

The main advantage of trading using opposite Sterling Capital and Needham Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Capital 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 Sterling Capital Stratton and Needham Growth Fund 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.