Correlation Between Transamerica Financial and Great West
Can any of the company-specific risk be diversified away by investing in both Transamerica Financial and Great West 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 Great West 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 Great West Government Mortgage, you can compare the effects of market volatilities on Transamerica Financial and Great West 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 Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Financial and Great West.
Diversification Opportunities for Transamerica Financial and Great West
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Transamerica and Great is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Great West Government Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Government 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 Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Government has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Great West go up and down completely randomly.
Pair Corralation between Transamerica Financial and Great West
Assuming the 90 days horizon Transamerica Financial is expected to generate 8.3 times less return on investment than Great West. In addition to that, Transamerica Financial is 1.85 times more volatile than Great West Government Mortgage. It trades about 0.01 of its total potential returns per unit of risk. Great West Government Mortgage is currently generating about 0.14 per unit of volatility. If you would invest 832.00 in Great West Government Mortgage on September 13, 2024 and sell it today you would earn a total of 8.00 from holding Great West Government Mortgage or generate 0.96% 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. Great West Government Mortgage
Performance |
| Timeline |
| Transamerica Financial |
| Great West Government |
Transamerica Financial and Great West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Financial and Great West
The main advantage of trading using opposite Transamerica Financial and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Financial position performs unexpectedly, Great West 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 Great West will offset losses from the drop in Great West's long position.The idea behind Transamerica Financial Life and Great West Government Mortgage 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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