Correlation Between Rbc Small and Needham Small

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

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

Diversification Opportunities for Rbc Small and Needham Small

0.59

Correlation Coefficient

Rbc Small  Needham Small

Very weak diversification

The 3 months correlation between Rbc and Needham is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Small Cap and Needham Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Small Cap and Rbc 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 Rbc Small Cap are associated (or correlated) with Needham Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Needham Small Cap has no effect on the direction of Rbc Small i.e., Rbc Small and Needham Small go up and down completely randomly.

Pair Corralation between Rbc Small and Needham Small

Assuming the 90 days horizon Rbc Small Cap is expected to under-perform the Needham Small. In addition to that, Rbc Small is 1.66 times more volatile than Needham Small Cap. It trades about -0.11 of its total potential returns per unit of risk. Needham Small Cap is currently generating about 0.02 per unit of volatility. If you would invest  1,815  in Needham Small Cap on September 24, 2024 and sell it today you would earn a total of  26.00  from holding Needham Small Cap or generate 1.43% return on investment over 90 days.

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

Rbc Small Cap  vs.  Needham Small Cap

Rbc Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rbc Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Needham Small Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Small Cap are ranked lower than 1 (%) 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.

Pair Trading with Rbc Small and Needham Small

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

The idea behind Rbc Small Cap and Needham Small 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.