Correlation Between Visa and Needham Growth

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

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

Diversification Opportunities for Visa and Needham Growth

-0.69

Correlation Coefficient

Visa  Needham Growth

Excellent diversification

The 3 months correlation between Visa and Needham is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Needham Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Growth and Visa 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 Visa Class A 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 Visa i.e., Visa and Needham Growth go up and down completely randomly.

Pair Corralation between Visa and Needham Growth

Taking into account the 90-day investment horizon Visa is expected to generate 1.68 times less return on investment than Needham Growth. But when comparing it to its historical volatility, Visa Class A is 2.06 times less risky than Needham Growth. It trades about 0.08 of its potential returns per unit of risk. 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 Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  Needham Growth

Visa Class A

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Needham Growth

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Visa and Needham Growth

The main advantage of trading using opposite Visa and Needham Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.