Correlation Between Transamerica Financial and Blackrock Capital
Can any of the company-specific risk be diversified away by investing in both Transamerica Financial and Blackrock Capital 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 Blackrock Capital 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 Blackrock Capital Appreciation, you can compare the effects of market volatilities on Transamerica Financial and Blackrock Capital 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 Blackrock Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Financial and Blackrock Capital.
Diversification Opportunities for Transamerica Financial and Blackrock Capital
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Transamerica and Blackrock is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Blackrock Capital Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Capital 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 Blackrock Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Capital has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Blackrock Capital go up and down completely randomly.
Pair Corralation between Transamerica Financial and Blackrock Capital
Assuming the 90 days horizon Transamerica Financial is expected to generate 5.4 times less return on investment than Blackrock Capital. But when comparing it to its historical volatility, Transamerica Financial Life is 1.55 times less risky than Blackrock Capital. It trades about 0.02 of its potential returns per unit of risk. Blackrock Capital Appreciation is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,867 in Blackrock Capital Appreciation on September 13, 2024 and sell it today you would earn a total of 56.00 from holding Blackrock Capital Appreciation or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Financial Life vs. Blackrock Capital Appreciation
Performance |
| Timeline |
| Transamerica Financial |
| Blackrock Capital |
Transamerica Financial and Blackrock Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Financial and Blackrock Capital
The main advantage of trading using opposite Transamerica Financial and Blackrock Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Financial position performs unexpectedly, Blackrock Capital 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 Blackrock Capital will offset losses from the drop in Blackrock Capital's long position.The idea behind Transamerica Financial Life and Blackrock Capital Appreciation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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