Correlation Between Needham Aggressive and First Trust

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

Diversification Opportunities for Needham Aggressive and First Trust

0.6

Correlation Coefficient

Needham Aggressive  First Trust

Poor diversification

The 3 months correlation between Needham and First is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Needham Aggressive Growth and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Short has no effect on the direction of Needham Aggressive i.e., Needham Aggressive and First Trust go up and down completely randomly.

Pair Corralation between Needham Aggressive and First Trust

Assuming the 90 days horizon Needham Aggressive Growth is expected to generate 8.6 times more return on investment than First Trust. However, Needham Aggressive is 8.6 times more volatile than First Trust Short. It trades about 0.33 of its potential returns per unit of risk. First Trust Short is currently generating about 0.35 per unit of risk. If you would invest  4,363  in Needham Aggressive Growth on April 26, 2025 and sell it today you would earn a total of  1,212  from holding Needham Aggressive Growth or generate 27.78% return on investment over 90 days.

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

Needham Aggressive Growth  vs.  First Trust Short

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 25 (%) 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.

First Trust Short

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Short are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, First Trust 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 First Trust

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

The idea behind Needham Aggressive Growth and First Trust Short 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.