Correlation Between Transamerica Asset and Small Cap
Can any of the company-specific risk be diversified away by investing in both Transamerica Asset and Small Cap 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 Asset and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Asset Allocation and Small Cap Stock, you can compare the effects of market volatilities on Transamerica Asset and Small Cap 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 Asset with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Asset and Small Cap.
Diversification Opportunities for Transamerica Asset and Small Cap
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Transamerica and Small is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Asset Allocation and Small Cap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Stock and Transamerica Asset 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 Asset Allocation are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Stock has no effect on the direction of Transamerica Asset i.e., Transamerica Asset and Small Cap go up and down completely randomly.
Pair Corralation between Transamerica Asset and Small Cap
Assuming the 90 days horizon Transamerica Asset Allocation is expected to generate 0.61 times more return on investment than Small Cap. However, Transamerica Asset Allocation is 1.65 times less risky than Small Cap. It trades about 0.11 of its potential returns per unit of risk. Small Cap Stock is currently generating about 0.05 per unit of risk. If you would invest 1,317 in Transamerica Asset Allocation on September 12, 2024 and sell it today you would earn a total of 299.00 from holding Transamerica Asset Allocation or generate 22.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Transamerica Asset Allocation vs. Small Cap Stock
Performance |
| Timeline |
| Transamerica Asset |
| Small Cap Stock |
Transamerica Asset and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Asset and Small Cap
The main advantage of trading using opposite Transamerica Asset and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Asset position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Transamerica Asset vs. Small Cap Stock | Transamerica Asset vs. Volumetric Fund Volumetric | Transamerica Asset vs. Qs Growth Fund | Transamerica Asset vs. T Rowe Price |
| Small Cap vs. Shelton Emerging Markets | Small Cap vs. Kinetics Market Opportunities | Small Cap vs. Siit Emerging Markets | Small Cap vs. Investec Emerging Markets |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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