Correlation Between Needham Aggressive and Health Care

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

Diversification Opportunities for Needham Aggressive and Health Care

-0.27

Correlation Coefficient

Needham Aggressive  Health Care

Very good diversification

The 3 months correlation between Needham and Health is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Needham Aggressive Growth and Health Care Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Ultrasector 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Ultrasector has no effect on the direction of Needham Aggressive i.e., Needham Aggressive and Health Care go up and down completely randomly.

Pair Corralation between Needham Aggressive and Health Care

Assuming the 90 days horizon Needham Aggressive Growth is expected to generate 0.66 times more return on investment than Health Care. However, Needham Aggressive Growth is 1.52 times less risky than Health Care. It trades about 0.32 of its potential returns per unit of risk. Health Care Ultrasector is currently generating about -0.07 per unit of risk. If you would invest  4,484  in Needham Aggressive Growth on May 4, 2025 and sell it today you would earn a total of  1,115  from holding Needham Aggressive Growth or generate 24.87% return on investment over 90 days.

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

Needham Aggressive Growth  vs.  Health Care Ultrasector

Needham Aggressive Growth

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Aggressive Growth are ranked lower than 24 (%) 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.

Health Care Ultrasector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Health Care Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Needham Aggressive and Health Care

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

The idea behind Needham Aggressive Growth and Health Care Ultrasector 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 Transaction History module to view history of all your transactions and understand their impact on performance.