Correlation Between Nasdaq-100(r) and Transamerica Asset
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) 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 Nasdaq-100(r) and Transamerica Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 2x Strategy and Transamerica Asset Allocation , you can compare the effects of market volatilities on Nasdaq-100(r) 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 Nasdaq-100(r) with a short position of Transamerica Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Transamerica Asset.
Diversification Opportunities for Nasdaq-100(r) and Transamerica Asset
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nasdaq-100(r) and Transamerica is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Transamerica Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Asset and Nasdaq-100(r) 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 Nasdaq 100 2x Strategy 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 Nasdaq-100(r) i.e., Nasdaq-100(r) and Transamerica Asset go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and Transamerica Asset
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 2.68 times more return on investment than Transamerica Asset. However, Nasdaq-100(r) is 2.68 times more volatile than Transamerica Asset Allocation . It trades about 0.07 of its potential returns per unit of risk. Transamerica Asset Allocation is currently generating about 0.05 per unit of risk. If you would invest 35,031 in Nasdaq 100 2x Strategy on November 2, 2024 and sell it today you would earn a total of 5,167 from holding Nasdaq 100 2x Strategy or generate 14.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Transamerica Asset Allocation
Performance |
| Timeline |
| Nasdaq 100 2x |
| Transamerica Asset |
Nasdaq-100(r) and Transamerica Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and Transamerica Asset
The main advantage of trading using opposite Nasdaq-100(r) and Transamerica Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) 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.| Nasdaq-100(r) vs. Jhancock Diversified Macro | Nasdaq-100(r) vs. Transamerica Asset Allocation | Nasdaq-100(r) vs. Allianzgi Diversified Income | Nasdaq-100(r) vs. Tax Free Conservative Income |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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