Correlation Between Transamerica Funds and Western Asset
Can any of the company-specific risk be diversified away by investing in both Transamerica Funds and Western Asset 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 Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Funds and Western Asset Mortgage, you can compare the effects of market volatilities on Transamerica Funds and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Funds and Western Asset.
Diversification Opportunities for Transamerica Funds and Western Asset
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Transamerica and Western is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Funds and Western Asset Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Mortgage 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Mortgage has no effect on the direction of Transamerica Funds i.e., Transamerica Funds and Western Asset go up and down completely randomly.
Pair Corralation between Transamerica Funds and Western Asset
Assuming the 90 days horizon Transamerica Funds is expected to generate 1.82 times less return on investment than Western Asset. But when comparing it to its historical volatility, Transamerica Funds is 1.75 times less risky than Western Asset. It trades about 0.07 of its potential returns per unit of risk. Western Asset Mortgage is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 773.00 in Western Asset Mortgage on September 4, 2024 and sell it today you would earn a total of 58.00 from holding Western Asset Mortgage or generate 7.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.8% |
| Values | Daily Returns |
Transamerica Funds vs. Western Asset Mortgage
Performance |
| Timeline |
| Transamerica Funds |
| Western Asset Mortgage |
Transamerica Funds and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Funds and Western Asset
The main advantage of trading using opposite Transamerica Funds and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Funds position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset'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 |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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