Correlation Between Transamerica Short-term and Baron Health
Can any of the company-specific risk be diversified away by investing in both Transamerica Short-term and Baron Health 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 Baron Health 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 Baron Health Care, you can compare the effects of market volatilities on Transamerica Short-term and Baron Health 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 Baron Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Short-term and Baron Health.
Diversification Opportunities for Transamerica Short-term and Baron Health
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Transamerica and Baron is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Short Term Bond and Baron Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Health Care 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 Baron Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Health Care has no effect on the direction of Transamerica Short-term i.e., Transamerica Short-term and Baron Health go up and down completely randomly.
Pair Corralation between Transamerica Short-term and Baron Health
Assuming the 90 days horizon Transamerica Short-term is expected to generate 57.94 times less return on investment than Baron Health. But when comparing it to its historical volatility, Transamerica Short Term Bond is 9.9 times less risky than Baron Health. It trades about 0.06 of its potential returns per unit of risk. Baron Health Care is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 1,935 in Baron Health Care on November 2, 2024 and sell it today you would earn a total of 117.00 from holding Baron Health Care or generate 6.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Short Term Bond vs. Baron Health Care
Performance |
| Timeline |
| Transamerica Short Term |
| Baron Health Care |
Transamerica Short-term and Baron Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Short-term and Baron Health
The main advantage of trading using opposite Transamerica Short-term and Baron Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Short-term position performs unexpectedly, Baron Health 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 Baron Health will offset losses from the drop in Baron Health's long position.The idea behind Transamerica Short Term Bond and Baron Health Care 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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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