Correlation Between Dow 2x and Transamerica Intermediate
Can any of the company-specific risk be diversified away by investing in both Dow 2x and Transamerica Intermediate 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 Dow 2x and Transamerica Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow 2x Strategy and Transamerica Intermediate Muni, you can compare the effects of market volatilities on Dow 2x and Transamerica Intermediate 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 Dow 2x with a short position of Transamerica Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow 2x and Transamerica Intermediate.
Diversification Opportunities for Dow 2x and Transamerica Intermediate
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Transamerica is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dow 2x Strategy and Transamerica Intermediate Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Intermediate and Dow 2x 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 Dow 2x Strategy are associated (or correlated) with Transamerica Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Intermediate has no effect on the direction of Dow 2x i.e., Dow 2x and Transamerica Intermediate go up and down completely randomly.
Pair Corralation between Dow 2x and Transamerica Intermediate
Assuming the 90 days horizon Dow 2x Strategy is expected to generate 5.91 times more return on investment than Transamerica Intermediate. However, Dow 2x is 5.91 times more volatile than Transamerica Intermediate Muni. It trades about 0.05 of its potential returns per unit of risk. Transamerica Intermediate Muni is currently generating about 0.04 per unit of risk. If you would invest 11,923 in Dow 2x Strategy on October 16, 2024 and sell it today you would earn a total of 4,767 from holding Dow 2x Strategy or generate 39.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow 2x Strategy vs. Transamerica Intermediate Muni
Performance |
| Timeline |
| Dow 2x Strategy |
| Transamerica Intermediate |
Dow 2x and Transamerica Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow 2x and Transamerica Intermediate
The main advantage of trading using opposite Dow 2x and Transamerica Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 2x position performs unexpectedly, Transamerica Intermediate 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 Intermediate will offset losses from the drop in Transamerica Intermediate's long position.| Dow 2x vs. Sp 500 2x | Dow 2x vs. Inverse Dow 2x | Dow 2x vs. Nasdaq 100 2x Strategy | Dow 2x vs. Russell 2000 2x |
| Transamerica Intermediate vs. Artisan Developing World | Transamerica Intermediate vs. Mid Cap 15x Strategy | Transamerica Intermediate vs. Black Oak Emerging | Transamerica Intermediate vs. Dow 2x Strategy |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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