Correlation Between Transamerica Financial and Mid Cap

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Can any of the company-specific risk be diversified away by investing in both Transamerica Financial and Mid 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 Mid 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 Mid Cap Value Profund, you can compare the effects of market volatilities on Transamerica Financial and Mid 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 Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Financial and Mid Cap.

Diversification Opportunities for Transamerica Financial and Mid Cap

0.97
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Transamerica and Mid is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Mid Cap Value Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value 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 Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Value has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Mid Cap go up and down completely randomly.

Pair Corralation between Transamerica Financial and Mid Cap

Assuming the 90 days horizon Transamerica Financial is expected to generate 1.26 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Transamerica Financial Life is 1.32 times less risky than Mid Cap. It trades about 0.05 of its potential returns per unit of risk. Mid Cap Value Profund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,270  in Mid Cap Value Profund on September 13, 2024 and sell it today you would earn a total of  2,090  from holding Mid Cap Value Profund or generate 28.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Transamerica Financial Life  vs.  Mid Cap Value Profund

 Performance 
       Timeline  
Transamerica Financial 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Financial Life are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Transamerica Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Mid Cap Value 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value Profund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mid Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Transamerica Financial and Mid Cap Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Transamerica Financial and Mid Cap

The main advantage of trading using opposite Transamerica Financial and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Financial position performs unexpectedly, Mid 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 Mid Cap will offset losses from the drop in Mid Cap's long position.
The idea behind Transamerica Financial Life and Mid Cap Value Profund 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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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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