Correlation Between Needham Aggressive and Mid Cap

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

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

Diversification Opportunities for Needham Aggressive and Mid Cap

0.69

Correlation Coefficient

Needham Aggressive  Mid Cap

Poor diversification

The 3 months correlation between Needham and Mid is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Needham Aggressive Growth and Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value and Needham Aggressive 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 Needham Aggressive Growth are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Value has no effect on the direction of Needham Aggressive i.e., Needham Aggressive and Mid Cap go up and down completely randomly.

Pair Corralation between Needham Aggressive and Mid Cap

Assuming the 90 days horizon Needham Aggressive Growth is expected to under-perform the Mid Cap. In addition to that, Needham Aggressive is 1.82 times more volatile than Mid Cap Value. It trades about -0.16 of its total potential returns per unit of risk. Mid Cap Value is currently generating about -0.11 per unit of volatility. If you would invest  1,618  in Mid Cap Value on January 31, 2024 and sell it today you would lose (27.00) from holding Mid Cap Value or give up 1.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Needham Aggressive Growth  vs.  Mid Cap Value

Needham Aggressive Growth

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Aggressive Growth are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Needham Aggressive may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Mid Cap Value

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Needham Aggressive and Mid Cap

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

The idea behind Needham Aggressive Growth and Mid Cap Value 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.