Correlation Between Transamerica Financial and International Equity
Can any of the company-specific risk be diversified away by investing in both Transamerica Financial and International Equity 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 International Equity 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 International Equity Index, you can compare the effects of market volatilities on Transamerica Financial and International Equity 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 International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Financial and International Equity.
Diversification Opportunities for Transamerica Financial and International Equity
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Transamerica and International is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and International Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity 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 International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and International Equity go up and down completely randomly.
Pair Corralation between Transamerica Financial and International Equity
Assuming the 90 days horizon Transamerica Financial Life is expected to under-perform the International Equity. In addition to that, Transamerica Financial is 1.14 times more volatile than International Equity Index. It trades about -0.03 of its total potential returns per unit of risk. International Equity Index is currently generating about -0.03 per unit of volatility. If you would invest 1,157 in International Equity Index on October 21, 2024 and sell it today you would lose (41.00) from holding International Equity Index or give up 3.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Financial Life vs. International Equity Index
Performance |
| Timeline |
| Transamerica Financial |
| International Equity |
Transamerica Financial and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Financial and International Equity
The main advantage of trading using opposite Transamerica Financial and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Financial position performs unexpectedly, International Equity 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 International Equity will offset losses from the drop in International Equity's long position.| Transamerica Financial vs. Ab High Income | Transamerica Financial vs. Virtus High Yield | Transamerica Financial vs. Mesirow Financial High | Transamerica Financial vs. Prudential High Yield |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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