Correlation Between Needham Small and Voya Midcap

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

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

Diversification Opportunities for Needham Small and Voya Midcap

0.81

Correlation Coefficient

Needham Small  Voya Midcap

Very poor diversification

The 3 months correlation between Needham and Voya is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Voya Midcap Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Midcap Opportunities and Needham Small 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 Small Cap are associated (or correlated) with Voya Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Midcap Opportunities has no effect on the direction of Needham Small i.e., Needham Small and Voya Midcap go up and down completely randomly.

Pair Corralation between Needham Small and Voya Midcap

Assuming the 90 days horizon Needham Small Cap is expected to generate 1.06 times more return on investment than Voya Midcap. However, Needham Small is 1.06 times more volatile than Voya Midcap Opportunities. It trades about 0.05 of its potential returns per unit of risk. Voya Midcap Opportunities is currently generating about 0.02 per unit of risk. If you would invest  1,808  in Needham Small Cap on September 21, 2024 and sell it today you would earn a total of  27.00  from holding Needham Small Cap or generate 1.49% return on investment over 90 days.

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

Needham Small Cap  vs.  Voya Midcap Opportunities

Needham Small Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Small 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, Needham Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Voya Midcap Opportunities

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Midcap Opportunities are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Voya Midcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Needham Small and Voya Midcap

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

The idea behind Needham Small Cap and Voya Midcap Opportunities 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.