Correlation Between Transamerica Asset and Western Asset
Can any of the company-specific risk be diversified away by investing in both Transamerica Asset and Western Asset 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 Asset and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Asset Allocation and Western Asset Diversified, you can compare the effects of market volatilities on Transamerica Asset and Western Asset 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 Asset with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Asset and Western Asset.
Diversification Opportunities for Transamerica Asset and Western Asset
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Transamerica and Western is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Asset Allocation and Western Asset Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Diversified and Transamerica Asset 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 Asset Allocation are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Diversified has no effect on the direction of Transamerica Asset i.e., Transamerica Asset and Western Asset go up and down completely randomly.
Pair Corralation between Transamerica Asset and Western Asset
Assuming the 90 days horizon Transamerica Asset Allocation is expected to generate 2.26 times more return on investment than Western Asset. However, Transamerica Asset is 2.26 times more volatile than Western Asset Diversified. It trades about 0.12 of its potential returns per unit of risk. Western Asset Diversified is currently generating about 0.05 per unit of risk. If you would invest 1,237 in Transamerica Asset Allocation on September 14, 2024 and sell it today you would earn a total of 311.00 from holding Transamerica Asset Allocation or generate 25.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Transamerica Asset Allocation vs. Western Asset Diversified
Performance |
| Timeline |
| Transamerica Asset |
| Western Asset Diversified |
Transamerica Asset and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Asset and Western Asset
The main advantage of trading using opposite Transamerica Asset and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Asset position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.The idea behind Transamerica Asset Allocation and Western Asset Diversified 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.
| Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard 500 Index | Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard Total Stock |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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