Correlation Between Transamerica Financial and Salient Select
Can any of the company-specific risk be diversified away by investing in both Transamerica Financial and Salient Select 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 Salient Select 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 Salient Select Income, you can compare the effects of market volatilities on Transamerica Financial and Salient Select 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 Salient Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Financial and Salient Select.
Diversification Opportunities for Transamerica Financial and Salient Select
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Transamerica and Salient is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Salient Select Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salient Select Income 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 Salient Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salient Select Income has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Salient Select go up and down completely randomly.
Pair Corralation between Transamerica Financial and Salient Select
Assuming the 90 days horizon Transamerica Financial Life is expected to generate 1.1 times more return on investment than Salient Select. However, Transamerica Financial is 1.1 times more volatile than Salient Select Income. It trades about 0.23 of its potential returns per unit of risk. Salient Select Income is currently generating about -0.05 per unit of risk. If you would invest 1,059 in Transamerica Financial Life on October 22, 2024 and sell it today you would earn a total of 27.00 from holding Transamerica Financial Life or generate 2.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Financial Life vs. Salient Select Income
Performance |
| Timeline |
| Transamerica Financial |
| Salient Select Income |
Transamerica Financial and Salient Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Financial and Salient Select
The main advantage of trading using opposite Transamerica Financial and Salient Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Financial position performs unexpectedly, Salient Select 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 Salient Select will offset losses from the drop in Salient Select's long position.| Transamerica Financial vs. Needham Aggressive Growth | Transamerica Financial vs. Ab Small Cap | Transamerica Financial vs. L Abbett Growth | Transamerica Financial vs. Ab Small Cap |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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