Correlation Between Transamerica High and Pear Tree
Can any of the company-specific risk be diversified away by investing in both Transamerica High and Pear Tree 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 High and Pear Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica High Yield and Pear Tree Polaris, you can compare the effects of market volatilities on Transamerica High and Pear Tree 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 High with a short position of Pear Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica High and Pear Tree.
Diversification Opportunities for Transamerica High and Pear Tree
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Transamerica and Pear is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica High Yield and Pear Tree Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Polaris and Transamerica High 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 High Yield are associated (or correlated) with Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Polaris has no effect on the direction of Transamerica High i.e., Transamerica High and Pear Tree go up and down completely randomly.
Pair Corralation between Transamerica High and Pear Tree
Assuming the 90 days horizon Transamerica High is expected to generate 4.29 times less return on investment than Pear Tree. But when comparing it to its historical volatility, Transamerica High Yield is 4.19 times less risky than Pear Tree. It trades about 0.16 of its potential returns per unit of risk. Pear Tree Polaris is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,137 in Pear Tree Polaris on November 3, 2024 and sell it today you would earn a total of 31.00 from holding Pear Tree Polaris or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Transamerica High Yield vs. Pear Tree Polaris
Performance |
| Timeline |
| Transamerica High Yield |
| Pear Tree Polaris |
Transamerica High and Pear Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica High and Pear Tree
The main advantage of trading using opposite Transamerica High and Pear Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica High position performs unexpectedly, Pear Tree 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 Pear Tree will offset losses from the drop in Pear Tree's long position.| Transamerica High vs. Barings High Yield | Transamerica High vs. Ultra Short Fixed Income | Transamerica High vs. Ambrus Core Bond | Transamerica High vs. Rationalpier 88 Convertible |
| Pear Tree vs. Ultra Short Fixed Income | Pear Tree vs. Multisector Bond Sma | Pear Tree vs. Rationalpier 88 Convertible | Pear Tree vs. Kinetics Spin Off And |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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