Correlation Between Transamerica Financial and Touchstone Arbitrage
Can any of the company-specific risk be diversified away by investing in both Transamerica Financial and Touchstone Arbitrage 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 Touchstone Arbitrage 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 Touchstone Arbitrage Fund, you can compare the effects of market volatilities on Transamerica Financial and Touchstone Arbitrage 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 Touchstone Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Financial and Touchstone Arbitrage.
Diversification Opportunities for Transamerica Financial and Touchstone Arbitrage
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Transamerica and Touchstone is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Touchstone Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Arbitrage 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 Touchstone Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Arbitrage has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Touchstone Arbitrage go up and down completely randomly.
Pair Corralation between Transamerica Financial and Touchstone Arbitrage
Assuming the 90 days horizon Transamerica Financial Life is expected to generate 4.0 times more return on investment than Touchstone Arbitrage. However, Transamerica Financial is 4.0 times more volatile than Touchstone Arbitrage Fund. It trades about 0.31 of its potential returns per unit of risk. Touchstone Arbitrage Fund is currently generating about 0.19 per unit of risk. If you would invest 1,175 in Transamerica Financial Life on September 5, 2024 and sell it today you would earn a total of 62.00 from holding Transamerica Financial Life or generate 5.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Transamerica Financial Life vs. Touchstone Arbitrage Fund
Performance |
| Timeline |
| Transamerica Financial |
| Touchstone Arbitrage |
Transamerica Financial and Touchstone Arbitrage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Financial and Touchstone Arbitrage
The main advantage of trading using opposite Transamerica Financial and Touchstone Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Financial position performs unexpectedly, Touchstone Arbitrage 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 Touchstone Arbitrage will offset losses from the drop in Touchstone Arbitrage's long position.| Transamerica Financial vs. Touchstone Small Cap | Transamerica Financial vs. Ancorathelen Small Mid Cap | Transamerica Financial vs. Small Cap Value | Transamerica Financial vs. Ab Small Cap |
| Touchstone Arbitrage vs. Davis Financial Fund | Touchstone Arbitrage vs. Transamerica Financial Life | Touchstone Arbitrage vs. Angel Oak Financial | Touchstone Arbitrage vs. Royce Global Financial |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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