Correlation Between Transamerica Smallmid and Transamerica Asset
Can any of the company-specific risk be diversified away by investing in both Transamerica Smallmid and Transamerica 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 Smallmid and Transamerica Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Smallmid Cap and Transamerica Asset Allocation, you can compare the effects of market volatilities on Transamerica Smallmid and Transamerica 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 Smallmid with a short position of Transamerica Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Smallmid and Transamerica Asset.
Diversification Opportunities for Transamerica Smallmid and Transamerica Asset
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Transamerica and TRANSAMERICA is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Smallmid Cap and Transamerica Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Asset and Transamerica Smallmid 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 Smallmid Cap are associated (or correlated) with Transamerica Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Asset has no effect on the direction of Transamerica Smallmid i.e., Transamerica Smallmid and Transamerica Asset go up and down completely randomly.
Pair Corralation between Transamerica Smallmid and Transamerica Asset
Assuming the 90 days horizon Transamerica Smallmid Cap is expected to generate 2.26 times more return on investment than Transamerica Asset. However, Transamerica Smallmid is 2.26 times more volatile than Transamerica Asset Allocation. It trades about 0.26 of its potential returns per unit of risk. Transamerica Asset Allocation is currently generating about 0.38 per unit of risk. If you would invest 2,944 in Transamerica Smallmid Cap on September 5, 2024 and sell it today you would earn a total of 182.00 from holding Transamerica Smallmid Cap or generate 6.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Smallmid Cap vs. Transamerica Asset Allocation
Performance |
| Timeline |
| Transamerica Smallmid Cap |
| Transamerica Asset |
Transamerica Smallmid and Transamerica Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Smallmid and Transamerica Asset
The main advantage of trading using opposite Transamerica Smallmid and Transamerica Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Smallmid position performs unexpectedly, Transamerica 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 Transamerica Asset will offset losses from the drop in Transamerica Asset's long position.The idea behind Transamerica Smallmid Cap and Transamerica Asset Allocation 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.
| Transamerica Asset vs. Transamerica Capital Growth | Transamerica Asset vs. Transamerica Flexible Income | Transamerica Asset vs. Transamerica High Yield | Transamerica Asset vs. Transamerica Smallmid Cap |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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