Correlation Between Transamerica Asset and Westwood Smidcap
Can any of the company-specific risk be diversified away by investing in both Transamerica Asset and Westwood Smidcap 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 Westwood Smidcap 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 Westwood Smidcap Fund, you can compare the effects of market volatilities on Transamerica Asset and Westwood Smidcap 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 Westwood Smidcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Asset and Westwood Smidcap.
Diversification Opportunities for Transamerica Asset and Westwood Smidcap
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Transamerica and Westwood is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Asset Allocation and Westwood Smidcap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Smidcap 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 Westwood Smidcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Smidcap has no effect on the direction of Transamerica Asset i.e., Transamerica Asset and Westwood Smidcap go up and down completely randomly.
Pair Corralation between Transamerica Asset and Westwood Smidcap
Assuming the 90 days horizon Transamerica Asset is expected to generate 1.14 times less return on investment than Westwood Smidcap. But when comparing it to its historical volatility, Transamerica Asset Allocation is 1.83 times less risky than Westwood Smidcap. It trades about 0.14 of its potential returns per unit of risk. Westwood Smidcap Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,408 in Westwood Smidcap Fund on September 4, 2024 and sell it today you would earn a total of 324.00 from holding Westwood Smidcap Fund or generate 23.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Asset Allocation vs. Westwood Smidcap Fund
Performance |
| Timeline |
| Transamerica Asset |
| Westwood Smidcap |
Transamerica Asset and Westwood Smidcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Asset and Westwood Smidcap
The main advantage of trading using opposite Transamerica Asset and Westwood Smidcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Asset position performs unexpectedly, Westwood Smidcap 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 Westwood Smidcap will offset losses from the drop in Westwood Smidcap's long position.| Transamerica Asset vs. 361 Global Longshort | Transamerica Asset vs. Barings Global Floating | Transamerica Asset vs. Commonwealth Global Fund | Transamerica Asset vs. Ab Global Bond |
| Westwood Smidcap vs. Matson Money Equity | Westwood Smidcap vs. Franklin Government Money | Westwood Smidcap vs. Lord Abbett Emerging | Westwood Smidcap vs. Janus Investment |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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