Correlation Between Needham Small and Catalyst Mlp

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

Diversification Opportunities for Needham Small and Catalyst Mlp

0.63

Correlation Coefficient

Needham Small  Catalyst Mlp

Poor diversification

The 3 months correlation between Needham and Catalyst is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Catalyst Mlp Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Mlp Infrast 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 Catalyst Mlp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Mlp Infrast has no effect on the direction of Needham Small i.e., Needham Small and Catalyst Mlp go up and down completely randomly.

Pair Corralation between Needham Small and Catalyst Mlp

Assuming the 90 days horizon Needham Small is expected to generate 3.22 times less return on investment than Catalyst Mlp. In addition to that, Needham Small is 1.26 times more volatile than Catalyst Mlp Infrastructure. It trades about 0.04 of its total potential returns per unit of risk. Catalyst Mlp Infrastructure is currently generating about 0.17 per unit of volatility. If you would invest  2,506  in Catalyst Mlp Infrastructure on September 28, 2024 and sell it today you would earn a total of  323.00  from holding Catalyst Mlp Infrastructure or generate 12.89% return on investment over 90 days.

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

Needham Small Cap  vs.  Catalyst Mlp Infrastructure

Needham Small Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Small Cap are ranked lower than 3 (%) 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.

Catalyst Mlp Infrast

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Mlp Infrastructure are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Catalyst Mlp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Needham Small and Catalyst Mlp

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

The idea behind Needham Small Cap and Catalyst Mlp Infrastructure 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.