Correlation Between Transamerica Financial and Bridge Builder
Can any of the company-specific risk be diversified away by investing in both Transamerica Financial and Bridge Builder 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 Bridge Builder 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 Bridge Builder E, you can compare the effects of market volatilities on Transamerica Financial and Bridge Builder 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 Bridge Builder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Financial and Bridge Builder.
Diversification Opportunities for Transamerica Financial and Bridge Builder
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Transamerica and Bridge is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Bridge Builder E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridge Builder E 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 Bridge Builder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridge Builder E has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Bridge Builder go up and down completely randomly.
Pair Corralation between Transamerica Financial and Bridge Builder
Assuming the 90 days horizon Transamerica Financial Life is expected to generate 2.27 times more return on investment than Bridge Builder. However, Transamerica Financial is 2.27 times more volatile than Bridge Builder E. It trades about 0.25 of its potential returns per unit of risk. Bridge Builder E is currently generating about 0.06 per unit of risk. If you would invest 1,185 in Transamerica Financial Life on August 29, 2024 and sell it today you would earn a total of 53.00 from holding Transamerica Financial Life or generate 4.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Financial Life vs. Bridge Builder E
Performance |
| Timeline |
| Transamerica Financial |
| Bridge Builder E |
Transamerica Financial and Bridge Builder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Financial and Bridge Builder
The main advantage of trading using opposite Transamerica Financial and Bridge Builder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Financial position performs unexpectedly, Bridge Builder 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 Bridge Builder will offset losses from the drop in Bridge Builder's long position.| Transamerica Financial vs. Vanguard Mid Cap Value | Transamerica Financial vs. HUMANA INC | Transamerica Financial vs. Aquagold International | Transamerica Financial vs. Barloworld Ltd ADR |
| Bridge Builder vs. Davis Financial Fund | Bridge Builder vs. Transamerica Financial Life | Bridge Builder vs. Icon Financial Fund | Bridge Builder vs. First Trust Specialty |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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