Correlation Between Growth Strategy and Transamerica Large
Can any of the company-specific risk be diversified away by investing in both Growth Strategy and Transamerica Large 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 Growth Strategy and Transamerica Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Strategy Fund and Transamerica Large Cap, you can compare the effects of market volatilities on Growth Strategy and Transamerica Large 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 Growth Strategy with a short position of Transamerica Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Strategy and Transamerica Large.
Diversification Opportunities for Growth Strategy and Transamerica Large
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GROWTH and Transamerica is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Growth Strategy Fund and Transamerica Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Cap and Growth Strategy 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 Growth Strategy Fund are associated (or correlated) with Transamerica Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Large Cap has no effect on the direction of Growth Strategy i.e., Growth Strategy and Transamerica Large go up and down completely randomly.
Pair Corralation between Growth Strategy and Transamerica Large
Assuming the 90 days horizon Growth Strategy is expected to generate 1.41 times less return on investment than Transamerica Large. But when comparing it to its historical volatility, Growth Strategy Fund is 1.08 times less risky than Transamerica Large. It trades about 0.13 of its potential returns per unit of risk. Transamerica Large Cap is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,200 in Transamerica Large Cap on September 2, 2024 and sell it today you would earn a total of 377.00 from holding Transamerica Large Cap or generate 31.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Strategy Fund vs. Transamerica Large Cap
Performance |
| Timeline |
| Growth Strategy |
| Transamerica Large Cap |
Growth Strategy and Transamerica Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Strategy and Transamerica Large
The main advantage of trading using opposite Growth Strategy and Transamerica Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Strategy position performs unexpectedly, Transamerica Large 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 Large will offset losses from the drop in Transamerica Large's long position.| Growth Strategy vs. International Developed Markets | Growth Strategy vs. Global Real Estate | Growth Strategy vs. Global Real Estate | Growth Strategy vs. Global Real Estate |
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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