Correlation Between Consumer Services and Needham Aggressive

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

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

Diversification Opportunities for Consumer Services and Needham Aggressive

0.9

Correlation Coefficient

Consumer Services  Needham Aggressive

Almost no diversification

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

Pair Corralation between Consumer Services and Needham Aggressive

Assuming the 90 days horizon Consumer Services is expected to generate 1.31 times less return on investment than Needham Aggressive. In addition to that, Consumer Services is 1.48 times more volatile than Needham Aggressive Growth. It trades about 0.18 of its total potential returns per unit of risk. Needham Aggressive Growth is currently generating about 0.34 per unit of volatility. If you would invest  4,353  in Needham Aggressive Growth on May 1, 2025 and sell it today you would earn a total of  1,246  from holding Needham Aggressive Growth or generate 28.62% return on investment over 90 days.

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

Consumer Services Ultrasector  vs.  Needham Aggressive Growth

Consumer Services

Risk-Adjusted Performance

Good

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

Needham Aggressive Growth

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Aggressive Growth are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Needham Aggressive showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Consumer Services and Needham Aggressive

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

The idea behind Consumer Services Ultrasector and Needham Aggressive Growth 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.