Correlation Between Transamerica Intermediate and The Arbitrage
Can any of the company-specific risk be diversified away by investing in both Transamerica Intermediate and The Arbitrage 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 Intermediate and The Arbitrage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Intermediate Muni and The Arbitrage Fund, you can compare the effects of market volatilities on Transamerica Intermediate and The Arbitrage 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 Intermediate with a short position of The Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Intermediate and The Arbitrage.
Diversification Opportunities for Transamerica Intermediate and The Arbitrage
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Transamerica and The is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Intermediate Muni and The Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Arbitrage and Transamerica Intermediate 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 Intermediate Muni are associated (or correlated) with The Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Arbitrage has no effect on the direction of Transamerica Intermediate i.e., Transamerica Intermediate and The Arbitrage go up and down completely randomly.
Pair Corralation between Transamerica Intermediate and The Arbitrage
Assuming the 90 days horizon Transamerica Intermediate Muni is expected to generate 1.07 times more return on investment than The Arbitrage. However, Transamerica Intermediate is 1.07 times more volatile than The Arbitrage Fund. It trades about 0.23 of its potential returns per unit of risk. The Arbitrage Fund is currently generating about -0.01 per unit of risk. If you would invest 1,070 in Transamerica Intermediate Muni on August 31, 2024 and sell it today you would earn a total of 16.00 from holding Transamerica Intermediate Muni or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Intermediate Muni vs. The Arbitrage Fund
Performance |
| Timeline |
| Transamerica Intermediate |
| The Arbitrage |
Transamerica Intermediate and The Arbitrage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Intermediate and The Arbitrage
The main advantage of trading using opposite Transamerica Intermediate and The Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Intermediate position performs unexpectedly, The Arbitrage 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 The Arbitrage will offset losses from the drop in The Arbitrage's long position.The idea behind Transamerica Intermediate Muni and The Arbitrage Fund 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.
| The Arbitrage vs. Transamerica Intermediate Muni | The Arbitrage vs. Inflation Protected Bond Fund | The Arbitrage vs. Oklahoma Municipal Fund | The Arbitrage vs. Ambrus Core Bond |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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