Correlation Between Ultramid Cap and Needham Small

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

By analyzing existing cross correlation between Ultramid Cap Profund Ultramid Cap and Needham Small Cap, you can compare the effects of market volatilities on Ultramid Cap and Needham Small 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 Ultramid Cap with a short position of Needham Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultramid Cap and Needham Small.

Diversification Opportunities for Ultramid Cap and Needham Small

0.8

Correlation Coefficient

Ultramid Cap  Needham Small

Very poor diversification

The 3 months correlation between Ultramid and Needham is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ultramid Cap Profund Ultramid and Needham Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Small Cap and Ultramid Cap 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 Ultramid Cap Profund Ultramid Cap are associated (or correlated) with Needham Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Needham Small Cap has no effect on the direction of Ultramid Cap i.e., Ultramid Cap and Needham Small go up and down completely randomly.

Pair Corralation between Ultramid Cap and Needham Small

Assuming the 90 days horizon Ultramid Cap Profund Ultramid Cap is expected to generate 1.17 times more return on investment than Needham Small. However, Ultramid Cap is 1.17 times more volatile than Needham Small Cap. It trades about 0.07 of its potential returns per unit of risk. Needham Small Cap is currently generating about 0.06 per unit of risk. If you would invest  3,590  in Ultramid Cap Profund Ultramid Cap on September 26, 2024 and sell it today you would earn a total of  1,710  from holding Ultramid Cap Profund Ultramid Cap or generate 47.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.68%
Values	Daily Returns

Ultramid Cap Profund Ultramid   vs.  Needham Small Cap

Ultramid Cap Profund

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ultramid Cap Profund Ultramid Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ultramid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Needham Small Cap

Risk-Adjusted Performance

2 of 100

Weak

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 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.

Pair Trading with Ultramid Cap and Needham Small

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

The idea behind Ultramid Cap Profund Ultramid Cap and Needham Small Cap 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.