Correlation Between Transamerica Financial and Small Cap
Can any of the company-specific risk be diversified away by investing in both Transamerica Financial 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 Financial 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 Financial Life and Small Cap Growth, you can compare the effects of market volatilities on Transamerica Financial 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 Financial with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Financial and Small Cap.
Diversification Opportunities for Transamerica Financial and Small Cap
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Transamerica and Small is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and Transamerica Financial 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 Financial Life 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 Growth has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Small Cap go up and down completely randomly.
Pair Corralation between Transamerica Financial and Small Cap
Assuming the 90 days horizon Transamerica Financial Life is expected to under-perform the Small Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Transamerica Financial Life is 1.5 times less risky than Small Cap. The mutual fund trades about -0.2 of its potential returns per unit of risk. The Small Cap Growth is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 2,364 in Small Cap Growth on September 20, 2024 and sell it today you would lose (62.00) from holding Small Cap Growth or give up 2.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Transamerica Financial Life vs. Small Cap Growth
Performance |
| Timeline |
| Transamerica Financial |
| Small Cap Growth |
Transamerica Financial and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Financial and Small Cap
The main advantage of trading using opposite Transamerica Financial and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Financial 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 Financial vs. Amg River Road | Transamerica Financial vs. Mutual Of America | Transamerica Financial vs. Valic Company I | Transamerica Financial vs. William Blair Small |
| Small Cap vs. Mid Cap Value | Small Cap vs. Equity Growth Fund | Small Cap vs. Income Growth Fund | Small Cap vs. Diversified Bond Fund |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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