Correlation Between Transamerica Emerging and Firsthand Alternative
Can any of the company-specific risk be diversified away by investing in both Transamerica Emerging and Firsthand Alternative 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 Transamerica Emerging and Firsthand Alternative into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Emerging Markets and Firsthand Alternative Energy, you can compare the effects of market volatilities on Transamerica Emerging and Firsthand Alternative 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 Transamerica Emerging with a short position of Firsthand Alternative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Emerging and Firsthand Alternative.
Diversification Opportunities for Transamerica Emerging and Firsthand Alternative
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Transamerica and Firsthand is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Emerging Markets and Firsthand Alternative Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firsthand Alternative and Transamerica Emerging 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 Transamerica Emerging Markets are associated (or correlated) with Firsthand Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firsthand Alternative has no effect on the direction of Transamerica Emerging i.e., Transamerica Emerging and Firsthand Alternative go up and down completely randomly.
Pair Corralation between Transamerica Emerging and Firsthand Alternative
Assuming the 90 days horizon Transamerica Emerging Markets is expected to generate 0.18 times more return on investment than Firsthand Alternative. However, Transamerica Emerging Markets is 5.44 times less risky than Firsthand Alternative. It trades about 0.11 of its potential returns per unit of risk. Firsthand Alternative Energy is currently generating about -0.01 per unit of risk. If you would invest 786.00 in Transamerica Emerging Markets on September 4, 2024 and sell it today you would earn a total of 148.00 from holding Transamerica Emerging Markets or generate 18.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Transamerica Emerging Markets vs. Firsthand Alternative Energy
Performance |
| Timeline |
| Transamerica Emerging |
| Firsthand Alternative |
Transamerica Emerging and Firsthand Alternative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Emerging and Firsthand Alternative
The main advantage of trading using opposite Transamerica Emerging and Firsthand Alternative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Emerging position performs unexpectedly, Firsthand Alternative 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 Firsthand Alternative will offset losses from the drop in Firsthand Alternative's long position.The idea behind Transamerica Emerging Markets and Firsthand Alternative Energy 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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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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