Correlation Between Ford and Transamerica Asset
Can any of the company-specific risk be diversified away by investing in both Ford and Transamerica Asset 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 Ford and Transamerica Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Transamerica Asset Allocation, you can compare the effects of market volatilities on Ford and Transamerica Asset 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 Ford with a short position of Transamerica Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Transamerica Asset.
Diversification Opportunities for Ford and Transamerica Asset
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Transamerica is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Transamerica Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Asset and Ford 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 Ford Motor are associated (or correlated) with Transamerica Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Asset has no effect on the direction of Ford i.e., Ford and Transamerica Asset go up and down completely randomly.
Pair Corralation between Ford and Transamerica Asset
Taking into account the 90-day investment horizon Ford is expected to generate 2.34 times less return on investment than Transamerica Asset. In addition to that, Ford is 4.96 times more volatile than Transamerica Asset Allocation. It trades about 0.01 of its total potential returns per unit of risk. Transamerica Asset Allocation is currently generating about 0.13 per unit of volatility. If you would invest 896.00 in Transamerica Asset Allocation on September 3, 2024 and sell it today you would earn a total of 130.00 from holding Transamerica Asset Allocation or generate 14.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Transamerica Asset Allocation
Performance |
| Timeline |
| Ford Motor |
| Transamerica Asset |
Ford and Transamerica Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Transamerica Asset
The main advantage of trading using opposite Ford and Transamerica Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Transamerica Asset 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 Asset will offset losses from the drop in Transamerica Asset's long position.The idea behind Ford Motor and Transamerica Asset Allocation 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.| Transamerica Asset vs. Multimedia Portfolio Multimedia | Transamerica Asset vs. Gmo Global Equity | Transamerica Asset vs. Rbc Global Equity | Transamerica Asset vs. The Hartford Equity |
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.
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