Correlation Between Needham Aggressive and Avantis Large

Can any of the company-specific risk be diversified away by investing in both Needham Aggressive and Avantis Large 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 Avantis Large 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 Avantis Large Cap, you can compare the effects of market volatilities on Needham Aggressive and Avantis Large 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 Avantis Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Aggressive and Avantis Large.

Diversification Opportunities for Needham Aggressive and Avantis Large

0.66

Correlation Coefficient

Needham Aggressive  Avantis Large

Poor diversification

The 3 months correlation between Needham and Avantis is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Needham Aggressive Growth and Avantis Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Large Cap 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 Avantis Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Large Cap has no effect on the direction of Needham Aggressive i.e., Needham Aggressive and Avantis Large go up and down completely randomly.

Pair Corralation between Needham Aggressive and Avantis Large

Assuming the 90 days horizon Needham Aggressive is expected to generate 1.4 times less return on investment than Avantis Large. In addition to that, Needham Aggressive is 1.52 times more volatile than Avantis Large Cap. It trades about 0.01 of its total potential returns per unit of risk. Avantis Large Cap is currently generating about 0.03 per unit of volatility. If you would invest  1,418  in Avantis Large Cap on September 27, 2024 and sell it today you would earn a total of  21.00  from holding Avantis Large Cap or generate 1.48% return on investment over 90 days.

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

Needham Aggressive Growth  vs.  Avantis Large Cap

Needham Aggressive Growth

Risk-Adjusted Performance

1 of 100

Weak

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

Avantis Large Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Large Cap are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Avantis Large 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 Avantis Large

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

The idea behind Needham Aggressive Growth and Avantis Large 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.