Correlation Between Transamerica Short-term and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Transamerica Short-term and Sterling Capital 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 Short-term and Sterling Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Short Term Bond and Sterling Capital Short, you can compare the effects of market volatilities on Transamerica Short-term and Sterling Capital 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 Short-term with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Short-term and Sterling Capital.
Diversification Opportunities for Transamerica Short-term and Sterling Capital
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Transamerica and Sterling is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Short Term Bond and Sterling Capital Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Short and Transamerica Short-term 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 Short Term Bond are associated (or correlated) with Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Short has no effect on the direction of Transamerica Short-term i.e., Transamerica Short-term and Sterling Capital go up and down completely randomly.
Pair Corralation between Transamerica Short-term and Sterling Capital
Assuming the 90 days horizon Transamerica Short Term Bond is expected to generate 1.12 times more return on investment than Sterling Capital. However, Transamerica Short-term is 1.12 times more volatile than Sterling Capital Short. It trades about 0.14 of its potential returns per unit of risk. Sterling Capital Short is currently generating about 0.13 per unit of risk. If you would invest 973.00 in Transamerica Short Term Bond on November 6, 2024 and sell it today you would earn a total of 9.00 from holding Transamerica Short Term Bond or generate 0.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.31% |
| Values | Daily Returns |
Transamerica Short Term Bond vs. Sterling Capital Short
Performance |
| Timeline |
| Transamerica Short Term |
| Sterling Capital Short |
Transamerica Short-term and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Short-term and Sterling Capital
The main advantage of trading using opposite Transamerica Short-term and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Short-term position performs unexpectedly, Sterling Capital 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 Sterling Capital will offset losses from the drop in Sterling Capital's long position.The idea behind Transamerica Short Term Bond and Sterling Capital Short 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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