Correlation Between American Funds and Transamerica Emerging
Can any of the company-specific risk be diversified away by investing in both American Funds and Transamerica Emerging 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 American Funds and Transamerica Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and Transamerica Emerging Markets, you can compare the effects of market volatilities on American Funds and Transamerica Emerging 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 American Funds with a short position of Transamerica Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Transamerica Emerging.
Diversification Opportunities for American Funds and Transamerica Emerging
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Transamerica is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and Transamerica Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Emerging and American Funds 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 American Funds Fundamental are associated (or correlated) with Transamerica Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Emerging has no effect on the direction of American Funds i.e., American Funds and Transamerica Emerging go up and down completely randomly.
Pair Corralation between American Funds and Transamerica Emerging
Assuming the 90 days horizon American Funds Fundamental is expected to generate 1.04 times more return on investment than Transamerica Emerging. However, American Funds is 1.04 times more volatile than Transamerica Emerging Markets. It trades about 0.1 of its potential returns per unit of risk. Transamerica Emerging Markets is currently generating about -0.13 per unit of risk. If you would invest 8,592 in American Funds Fundamental on August 31, 2024 and sell it today you would earn a total of 142.00 from holding American Funds Fundamental or generate 1.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Fundamental vs. Transamerica Emerging Markets
Performance |
| Timeline |
| American Funds Funda |
| Transamerica Emerging |
American Funds and Transamerica Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Transamerica Emerging
The main advantage of trading using opposite American Funds and Transamerica Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Transamerica Emerging 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 Emerging will offset losses from the drop in Transamerica Emerging's long position.| American Funds vs. Transamerica Emerging Markets | American Funds vs. Franklin Emerging Market | American Funds vs. Dws Emerging Markets | American Funds vs. Black Oak Emerging |
| Transamerica Emerging vs. Pear Tree Polaris | Transamerica Emerging vs. Artisan High Income | Transamerica Emerging vs. HUMANA INC | Transamerica Emerging vs. Aquagold International |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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