Correlation Between Transamerica Multi-managed and American Balanced
Can any of the company-specific risk be diversified away by investing in both Transamerica Multi-managed and American Balanced 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 Balanced 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 Balanced Fund, you can compare the effects of market volatilities on Transamerica Multi-managed and American Balanced 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 Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Multi-managed and American Balanced.
Diversification Opportunities for Transamerica Multi-managed and American Balanced
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Transamerica and American is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Multi Managed Bal and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced 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 Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Balanced has no effect on the direction of Transamerica Multi-managed i.e., Transamerica Multi-managed and American Balanced go up and down completely randomly.
Pair Corralation between Transamerica Multi-managed and American Balanced
Assuming the 90 days horizon Transamerica Multi Managed Balanced is expected to under-perform the American Balanced. In addition to that, Transamerica Multi-managed is 1.02 times more volatile than American Balanced Fund. It trades about -0.14 of its total potential returns per unit of risk. American Balanced Fund is currently generating about 0.04 per unit of volatility. If you would invest 3,494 in American Balanced Fund on November 29, 2024 and sell it today you would earn a total of 11.00 from holding American Balanced Fund or generate 0.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Transamerica Multi Managed Bal vs. American Balanced Fund
Performance |
| Timeline |
| Transamerica Multi-managed |
| American Balanced |
Transamerica Multi-managed and American Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Multi-managed and American Balanced
The main advantage of trading using opposite Transamerica Multi-managed and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Multi-managed position performs unexpectedly, American Balanced 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 Balanced will offset losses from the drop in American Balanced's long position.The idea behind Transamerica Multi Managed Balanced and American Balanced Fund 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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