Correlation Between Fuller Thaler and Transamerica Mid

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Can any of the company-specific risk be diversified away by investing in both Fuller Thaler and Transamerica Mid 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 Fuller Thaler and Transamerica Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fuller Thaler Behavioral and Transamerica Mid Cap, you can compare the effects of market volatilities on Fuller Thaler and Transamerica Mid 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 Fuller Thaler with a short position of Transamerica Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fuller Thaler and Transamerica Mid.

Diversification Opportunities for Fuller Thaler and Transamerica Mid

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Fuller and Transamerica is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Fuller Thaler Behavioral and Transamerica Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Mid Cap and Fuller Thaler 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 Fuller Thaler Behavioral are associated (or correlated) with Transamerica Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Mid Cap has no effect on the direction of Fuller Thaler i.e., Fuller Thaler and Transamerica Mid go up and down completely randomly.

Pair Corralation between Fuller Thaler and Transamerica Mid

Assuming the 90 days horizon Fuller Thaler Behavioral is expected to under-perform the Transamerica Mid. In addition to that, Fuller Thaler is 2.83 times more volatile than Transamerica Mid Cap. It trades about -0.24 of its total potential returns per unit of risk. Transamerica Mid Cap is currently generating about -0.05 per unit of volatility. If you would invest  1,237  in Transamerica Mid Cap on September 12, 2024 and sell it today you would lose (8.00) from holding Transamerica Mid Cap or give up 0.65% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Fuller Thaler Behavioral  vs.  Transamerica Mid Cap

 Performance 
       Timeline  
Fuller Thaler Behavioral 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Fuller Thaler Behavioral are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fuller Thaler is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Transamerica Mid Cap 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Mid Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transamerica Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fuller Thaler and Transamerica Mid Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fuller Thaler and Transamerica Mid

The main advantage of trading using opposite Fuller Thaler and Transamerica Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fuller Thaler position performs unexpectedly, Transamerica Mid 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 Mid will offset losses from the drop in Transamerica Mid's long position.
The idea behind Fuller Thaler Behavioral and Transamerica Mid Cap 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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