Correlation Between Transamerica Funds and Capital World
Can any of the company-specific risk be diversified away by investing in both Transamerica Funds and Capital World 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 Funds and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Funds and Capital World Growth, you can compare the effects of market volatilities on Transamerica Funds and Capital World 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 Funds with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Funds and Capital World.
Diversification Opportunities for Transamerica Funds and Capital World
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Transamerica and Capital is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Funds and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Transamerica Funds 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 Funds are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Transamerica Funds i.e., Transamerica Funds and Capital World go up and down completely randomly.
Pair Corralation between Transamerica Funds and Capital World
Assuming the 90 days horizon Transamerica Funds is expected to generate 4.93 times less return on investment than Capital World. But when comparing it to its historical volatility, Transamerica Funds is 3.24 times less risky than Capital World. It trades about 0.07 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,674 in Capital World Growth on September 3, 2024 and sell it today you would earn a total of 1,226 from holding Capital World Growth or generate 21.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Transamerica Funds vs. Capital World Growth
Performance |
| Timeline |
| Transamerica Funds |
| Capital World Growth |
Transamerica Funds and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Funds and Capital World
The main advantage of trading using opposite Transamerica Funds and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Funds position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Transamerica Funds vs. Vanguard Total Stock | Transamerica Funds vs. Vanguard 500 Index | Transamerica Funds vs. Vanguard Total Stock | Transamerica Funds vs. Vanguard Total Stock |
| Capital World vs. Bbh Intermediate Municipal | Capital World vs. Transamerica Funds | Capital World vs. Gamco Global Telecommunications | Capital World vs. T Rowe Price |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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