Correlation Between Transamerica Multi-managed and American Funds
Can any of the company-specific risk be diversified away by investing in both Transamerica Multi-managed and American Funds 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 Multi-managed and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Multi Managed Balanced and American Funds American, you can compare the effects of market volatilities on Transamerica Multi-managed and American Funds 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 Multi-managed with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Multi-managed and American Funds.
Diversification Opportunities for Transamerica Multi-managed and American Funds
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Transamerica and American is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Multi Managed Bal and American Funds American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds American and Transamerica Multi-managed 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 Multi Managed Balanced are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds American has no effect on the direction of Transamerica Multi-managed i.e., Transamerica Multi-managed and American Funds go up and down completely randomly.
Pair Corralation between Transamerica Multi-managed and American Funds
Assuming the 90 days horizon Transamerica Multi Managed Balanced is expected to generate 0.95 times more return on investment than American Funds. However, Transamerica Multi Managed Balanced is 1.06 times less risky than American Funds. It trades about 0.37 of its potential returns per unit of risk. American Funds American is currently generating about 0.24 per unit of risk. If you would invest 3,572 in Transamerica Multi Managed Balanced on September 1, 2024 and sell it today you would earn a total of 127.00 from holding Transamerica Multi Managed Balanced or generate 3.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Transamerica Multi Managed Bal vs. American Funds American
Performance |
Timeline |
Transamerica Multi-managed |
American Funds American |
Transamerica Multi-managed and American Funds Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Transamerica Multi-managed and American Funds
The main advantage of trading using opposite Transamerica Multi-managed and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Multi-managed position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.The idea behind Transamerica Multi Managed Balanced and American Funds American 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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