Correlation Between Transamerica Intermediate and Small-cap Value
Can any of the company-specific risk be diversified away by investing in both Transamerica Intermediate and Small-cap Value 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 Small-cap Value 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 Small Cap Value Fund, you can compare the effects of market volatilities on Transamerica Intermediate and Small-cap Value 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 Small-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Intermediate and Small-cap Value.
Diversification Opportunities for Transamerica Intermediate and Small-cap Value
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Transamerica and Small-cap is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Intermediate Muni and Small Cap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value 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 Small-cap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Transamerica Intermediate i.e., Transamerica Intermediate and Small-cap Value go up and down completely randomly.
Pair Corralation between Transamerica Intermediate and Small-cap Value
Assuming the 90 days horizon Transamerica Intermediate Muni is expected to under-perform the Small-cap Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, Transamerica Intermediate Muni is 4.74 times less risky than Small-cap Value. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Small Cap Value Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,739 in Small Cap Value Fund on November 7, 2024 and sell it today you would earn a total of 53.00 from holding Small Cap Value Fund or generate 1.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Transamerica Intermediate Muni vs. Small Cap Value Fund
Performance |
| Timeline |
| Transamerica Intermediate |
| Small Cap Value |
Transamerica Intermediate and Small-cap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Intermediate and Small-cap Value
The main advantage of trading using opposite Transamerica Intermediate and Small-cap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Intermediate position performs unexpectedly, Small-cap Value 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 Small-cap Value will offset losses from the drop in Small-cap Value's long position.The idea behind Transamerica Intermediate Muni and Small Cap Value 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.
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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