Correlation Between Value Line and Needham Growth

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

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

Diversification Opportunities for Value Line and Needham Growth

0.93

Correlation Coefficient

Value Line  Needham Growth

Almost no diversification

The 3 months correlation between VALUE and Needham is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Value Line Small and Needham Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Growth and Value Line 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 Value Line Small 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 Value Line i.e., Value Line and Needham Growth go up and down completely randomly.

Pair Corralation between Value Line and Needham Growth

Assuming the 90 days horizon Value Line Small is expected to generate 0.6 times more return on investment than Needham Growth. However, Value Line Small is 1.67 times less risky than Needham Growth. It trades about -0.1 of its potential returns per unit of risk. Needham Growth Fund is currently generating about -0.11 per unit of risk. If you would invest  5,999  in Value Line Small on December 19, 2024 and sell it today you would lose (379.00) from holding Value Line Small or give up 6.32% of portfolio value over 90 days.

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

Value Line Small  vs.  Needham Growth Fund

Value Line Small

Risk-Adjusted Performance

Very Weak

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

Needham Growth

Risk-Adjusted Performance

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 latest weak performance, the Fund's technical and fundamental 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 Value Line and Needham Growth

The main advantage of trading using opposite Value Line and Needham Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Line 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 Value Line Small 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.