Correlation Between Transamerica Emerging and Hennessy Cornerstone
Can any of the company-specific risk be diversified away by investing in both Transamerica Emerging and Hennessy Cornerstone 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 Emerging and Hennessy Cornerstone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Emerging Markets and Hennessy Nerstone Growth, you can compare the effects of market volatilities on Transamerica Emerging and Hennessy Cornerstone 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 Emerging with a short position of Hennessy Cornerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Emerging and Hennessy Cornerstone.
Diversification Opportunities for Transamerica Emerging and Hennessy Cornerstone
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Transamerica and Hennessy is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Emerging Markets and Hennessy Nerstone Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Growth and Transamerica Emerging 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 Emerging Markets are associated (or correlated) with Hennessy Cornerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Growth has no effect on the direction of Transamerica Emerging i.e., Transamerica Emerging and Hennessy Cornerstone go up and down completely randomly.
Pair Corralation between Transamerica Emerging and Hennessy Cornerstone
Assuming the 90 days horizon Transamerica Emerging is expected to generate 3.35 times less return on investment than Hennessy Cornerstone. But when comparing it to its historical volatility, Transamerica Emerging Markets is 1.51 times less risky than Hennessy Cornerstone. It trades about 0.06 of its potential returns per unit of risk. Hennessy Nerstone Growth is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,672 in Hennessy Nerstone Growth on September 4, 2024 and sell it today you would earn a total of 1,450 from holding Hennessy Nerstone Growth or generate 54.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Emerging Markets vs. Hennessy Nerstone Growth
Performance |
| Timeline |
| Transamerica Emerging |
| Hennessy Nerstone Growth |
Transamerica Emerging and Hennessy Cornerstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Emerging and Hennessy Cornerstone
The main advantage of trading using opposite Transamerica Emerging and Hennessy Cornerstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Emerging position performs unexpectedly, Hennessy Cornerstone 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 Hennessy Cornerstone will offset losses from the drop in Hennessy Cornerstone's long position.The idea behind Transamerica Emerging Markets and Hennessy Nerstone Growth 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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