Correlation Between Needham Aggressive and Voya Solution

Can any of the company-specific risk be diversified away by investing in both Needham Aggressive and Voya Solution 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 Voya Solution 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 Voya Solution 2045, you can compare the effects of market volatilities on Needham Aggressive and Voya Solution 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 Voya Solution. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Aggressive and Voya Solution.

Diversification Opportunities for Needham Aggressive and Voya Solution

0.9

Correlation Coefficient

Needham Aggressive  Voya Solution

Almost no diversification

The 3 months correlation between Needham and Voya is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Needham Aggressive Growth and Voya Solution 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Solution 2045 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 Voya Solution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Solution 2045 has no effect on the direction of Needham Aggressive i.e., Needham Aggressive and Voya Solution go up and down completely randomly.

Pair Corralation between Needham Aggressive and Voya Solution

Assuming the 90 days horizon Needham Aggressive Growth is expected to under-perform the Voya Solution. In addition to that, Needham Aggressive is 1.69 times more volatile than Voya Solution 2045. It trades about -0.11 of its total potential returns per unit of risk. Voya Solution 2045 is currently generating about -0.09 per unit of volatility. If you would invest  1,077  in Voya Solution 2045 on September 30, 2024 and sell it today you would lose (16.00) from holding Voya Solution 2045 or give up 1.49% of portfolio value over 90 days.

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

Needham Aggressive Growth  vs.  Voya Solution 2045

Needham Aggressive Growth

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Needham Aggressive Growth has generated negative risk-adjusted returns adding no value to fund investors. 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.

Voya Solution 2045

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voya Solution 2045 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Voya Solution 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 Voya Solution

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

The idea behind Needham Aggressive Growth and Voya Solution 2045 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.