Correlation Between Transamerica Financial and Income Stock
Can any of the company-specific risk be diversified away by investing in both Transamerica Financial and Income Stock 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 Income Stock 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 Income Stock Fund, you can compare the effects of market volatilities on Transamerica Financial and Income Stock 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 Income Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Financial and Income Stock.
Diversification Opportunities for Transamerica Financial and Income Stock
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Transamerica and Income is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Income Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Stock 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 Income Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Stock has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Income Stock go up and down completely randomly.
Pair Corralation between Transamerica Financial and Income Stock
Assuming the 90 days horizon Transamerica Financial Life is expected to generate 0.98 times more return on investment than Income Stock. However, Transamerica Financial Life is 1.02 times less risky than Income Stock. It trades about 0.25 of its potential returns per unit of risk. Income Stock Fund is currently generating about 0.24 per unit of risk. If you would invest 1,185 in Transamerica Financial Life on August 29, 2024 and sell it today you would earn a total of 53.00 from holding Transamerica Financial Life or generate 4.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Financial Life vs. Income Stock Fund
Performance |
| Timeline |
| Transamerica Financial |
| Income Stock |
Transamerica Financial and Income Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Financial and Income Stock
The main advantage of trading using opposite Transamerica Financial and Income Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Financial position performs unexpectedly, Income Stock 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 Income Stock will offset losses from the drop in Income Stock's long position.| Transamerica Financial vs. Vanguard Mid Cap Value | Transamerica Financial vs. HUMANA INC | Transamerica Financial vs. Aquagold International | Transamerica Financial vs. Barloworld Ltd ADR |
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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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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