Correlation Between Needham Small and Federated Municipal
Can any of the company-specific risk be diversified away by investing in both Needham Small and Federated Municipal 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 Federated Municipal 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 Federated Municipal Ultrashort, you can compare the effects of market volatilities on Needham Small and Federated Municipal 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 Federated Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Small and Federated Municipal.
Diversification Opportunities for Needham Small and Federated Municipal
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Needham and Federated is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Federated Municipal Ultrashort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Municipal 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 Federated Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Municipal has no effect on the direction of Needham Small i.e., Needham Small and Federated Municipal go up and down completely randomly.
Pair Corralation between Needham Small and Federated Municipal
Assuming the 90 days horizon Needham Small Cap is expected to generate 30.11 times more return on investment than Federated Municipal. However, Needham Small is 30.11 times more volatile than Federated Municipal Ultrashort. It trades about 0.17 of its potential returns per unit of risk. Federated Municipal Ultrashort is currently generating about 0.27 per unit of risk. If you would invest 1,605 in Needham Small Cap on May 31, 2025 and sell it today you would earn a total of 290.00 from holding Needham Small Cap or generate 18.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Needham Small Cap vs. Federated Municipal Ultrashort
Performance |
| Timeline |
| Needham Small Cap |
| Federated Municipal |
Needham Small and Federated Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Needham Small and Federated Municipal
The main advantage of trading using opposite Needham Small and Federated Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Small position performs unexpectedly, Federated Municipal 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 Federated Municipal will offset losses from the drop in Federated Municipal's long position.| Needham Small vs. Baron Opportunity Fund | Needham Small vs. Jacob Micro Cap | Needham Small vs. Needham Aggressive Growth | Needham Small vs. Needham Growth Fund |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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