Correlation Between Green Century and Transamerica Financial
Can any of the company-specific risk be diversified away by investing in both Green Century and Transamerica Financial 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 Green Century and Transamerica Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Green Century Balanced and Transamerica Financial Life, you can compare the effects of market volatilities on Green Century and Transamerica Financial 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 Green Century with a short position of Transamerica Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green Century and Transamerica Financial.
Diversification Opportunities for Green Century and Transamerica Financial
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Green and Transamerica is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Green Century Balanced and Transamerica Financial Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Financial and Green Century 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 Green Century Balanced are associated (or correlated) with Transamerica Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Financial has no effect on the direction of Green Century i.e., Green Century and Transamerica Financial go up and down completely randomly.
Pair Corralation between Green Century and Transamerica Financial
Assuming the 90 days horizon Green Century Balanced is expected to generate 0.58 times more return on investment than Transamerica Financial. However, Green Century Balanced is 1.71 times less risky than Transamerica Financial. It trades about 0.15 of its potential returns per unit of risk. Transamerica Financial Life is currently generating about -0.05 per unit of risk. If you would invest 3,752 in Green Century Balanced on September 12, 2024 and sell it today you would earn a total of 45.00 from holding Green Century Balanced or generate 1.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Green Century Balanced vs. Transamerica Financial Life
Performance |
| Timeline |
| Green Century Balanced |
| Transamerica Financial |
Green Century and Transamerica Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Green Century and Transamerica Financial
The main advantage of trading using opposite Green Century and Transamerica Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Green Century position performs unexpectedly, Transamerica Financial 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 Financial will offset losses from the drop in Transamerica Financial's long position.| Green Century vs. Transamerica Financial Life | Green Century vs. Fidelity Advisor Financial | Green Century vs. 1919 Financial Services | Green Century vs. Royce Global Financial |
| Transamerica Financial vs. SCOR PK | Transamerica Financial vs. Morningstar Unconstrained Allocation | Transamerica Financial vs. Thrivent High Yield | Transamerica Financial vs. Via Renewables |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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