Correlation Between Gmo High and Transamerica Mid
Can any of the company-specific risk be diversified away by investing in both Gmo High 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 Gmo High and Transamerica Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo High Yield and Transamerica Mid Cap, you can compare the effects of market volatilities on Gmo High 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 Gmo High with a short position of Transamerica Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Transamerica Mid.
Diversification Opportunities for Gmo High and Transamerica Mid
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GMO and TRANSAMERICA is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield 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 Gmo High 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 Gmo High Yield 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 Gmo High i.e., Gmo High and Transamerica Mid go up and down completely randomly.
Pair Corralation between Gmo High and Transamerica Mid
Assuming the 90 days horizon Gmo High is expected to generate 1.24 times less return on investment than Transamerica Mid. But when comparing it to its historical volatility, Gmo High Yield is 3.16 times less risky than Transamerica Mid. It trades about 0.13 of its potential returns per unit of risk. Transamerica Mid Cap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,011 in Transamerica Mid Cap on September 4, 2024 and sell it today you would earn a total of 246.00 from holding Transamerica Mid Cap or generate 24.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 83.4% |
| Values | Daily Returns |
Gmo High Yield vs. Transamerica Mid Cap
Performance |
| Timeline |
| Gmo High Yield |
| Transamerica Mid Cap |
Gmo High and Transamerica Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Transamerica Mid
The main advantage of trading using opposite Gmo High and Transamerica Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High 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.| Gmo High vs. California High Yield Municipal | Gmo High vs. Siit High Yield | Gmo High vs. Pace High Yield |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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