Correlation Between Smallcap World and Transamerica Large

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Smallcap World and Transamerica Large 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 Smallcap World and Transamerica Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap World Fund and Transamerica Large Core, you can compare the effects of market volatilities on Smallcap World and Transamerica Large 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 Smallcap World with a short position of Transamerica Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Transamerica Large.

Diversification Opportunities for Smallcap World and Transamerica Large

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Smallcap and Transamerica is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Transamerica Large Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Core and Smallcap World 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 Smallcap World Fund are associated (or correlated) with Transamerica Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Large Core has no effect on the direction of Smallcap World i.e., Smallcap World and Transamerica Large go up and down completely randomly.

Pair Corralation between Smallcap World and Transamerica Large

Assuming the 90 days horizon Smallcap World Fund is expected to generate 1.06 times more return on investment than Transamerica Large. However, Smallcap World is 1.06 times more volatile than Transamerica Large Core. It trades about 0.16 of its potential returns per unit of risk. Transamerica Large Core is currently generating about 0.12 per unit of risk. If you would invest  6,843  in Smallcap World Fund on October 24, 2024 and sell it today you would earn a total of  176.00  from holding Smallcap World Fund or generate 2.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Smallcap World Fund  vs.  Transamerica Large Core

 Performance 
       Timeline  
Smallcap World 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap World Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Smallcap World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Transamerica Large Core 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Transamerica Large Core 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Smallcap World and Transamerica Large Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Smallcap World and Transamerica Large

The main advantage of trading using opposite Smallcap World and Transamerica Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World position performs unexpectedly, Transamerica Large 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 Transamerica Large will offset losses from the drop in Transamerica Large's long position.
The idea behind Smallcap World Fund and Transamerica Large Core 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

Other Complementary Tools

Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Money Managers
Screen money managers from public funds and ETFs managed around the world
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon