Correlation Between Transamerica Asset and World Energy
Can any of the company-specific risk be diversified away by investing in both Transamerica Asset and World Energy 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 World Energy 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 World Energy Fund, you can compare the effects of market volatilities on Transamerica Asset and World Energy 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 World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Asset and World Energy.
Diversification Opportunities for Transamerica Asset and World Energy
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Transamerica and World is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Asset Allocation and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy 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 World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Transamerica Asset i.e., Transamerica Asset and World Energy go up and down completely randomly.
Pair Corralation between Transamerica Asset and World Energy
Assuming the 90 days horizon Transamerica Asset Allocation is expected to generate 0.39 times more return on investment than World Energy. However, Transamerica Asset Allocation is 2.59 times less risky than World Energy. It trades about 0.21 of its potential returns per unit of risk. World Energy Fund is currently generating about 0.07 per unit of risk. If you would invest 1,491 in Transamerica Asset Allocation on October 30, 2024 and sell it today you would earn a total of 45.00 from holding Transamerica Asset Allocation or generate 3.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Asset Allocation vs. World Energy Fund
Performance |
| Timeline |
| Transamerica Asset |
| World Energy |
Transamerica Asset and World Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Asset and World Energy
The main advantage of trading using opposite Transamerica Asset and World Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Asset position performs unexpectedly, World Energy 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 World Energy will offset losses from the drop in World Energy's long position.The idea behind Transamerica Asset Allocation and World Energy Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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