Correlation Between Needham Aggressive and Baron Health

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

Diversification Opportunities for Needham Aggressive and Baron Health

0.02

Correlation Coefficient

Needham Aggressive  Baron Health

Significant diversification

The 3 months correlation between Needham and Baron is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Needham Aggressive Growth and Baron Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Health Care 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 Baron Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Health Care has no effect on the direction of Needham Aggressive i.e., Needham Aggressive and Baron Health go up and down completely randomly.

Pair Corralation between Needham Aggressive and Baron Health

Assuming the 90 days horizon Needham Aggressive Growth is expected to generate 1.6 times more return on investment than Baron Health. However, Needham Aggressive is 1.6 times more volatile than Baron Health Care. It trades about 0.08 of its potential returns per unit of risk. Baron Health Care is currently generating about 0.03 per unit of risk. If you would invest  3,190  in Needham Aggressive Growth on September 3, 2024 and sell it today you would earn a total of  1,904  from holding Needham Aggressive Growth or generate 59.69% return on investment over 90 days.

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

Needham Aggressive Growth  vs.  Baron Health Care

Needham Aggressive Growth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Aggressive Growth are ranked lower than 8 (%) 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 January 2025.

Baron Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron Health Care has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Baron Health 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 Baron Health

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

The idea behind Needham Aggressive Growth and Baron Health Care 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.