Correlation Between Transamerica Growth and Transamerica Multi-managed
Can any of the company-specific risk be diversified away by investing in both Transamerica Growth and Transamerica Multi-managed 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 Growth and Transamerica Multi-managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Growth T and Transamerica Multi Managed Balanced, you can compare the effects of market volatilities on Transamerica Growth and Transamerica Multi-managed 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 Growth with a short position of Transamerica Multi-managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Growth and Transamerica Multi-managed.
Diversification Opportunities for Transamerica Growth and Transamerica Multi-managed
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Transamerica and Transamerica is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Growth T and Transamerica Multi Managed Bal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Multi-managed and Transamerica Growth 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 Growth T are associated (or correlated) with Transamerica Multi-managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Multi-managed has no effect on the direction of Transamerica Growth i.e., Transamerica Growth and Transamerica Multi-managed go up and down completely randomly.
Pair Corralation between Transamerica Growth and Transamerica Multi-managed
Assuming the 90 days horizon Transamerica Growth T is expected to generate 2.03 times more return on investment than Transamerica Multi-managed. However, Transamerica Growth is 2.03 times more volatile than Transamerica Multi Managed Balanced. It trades about 0.09 of its potential returns per unit of risk. Transamerica Multi Managed Balanced is currently generating about 0.12 per unit of risk. If you would invest 9,142 in Transamerica Growth T on August 28, 2024 and sell it today you would earn a total of 3,475 from holding Transamerica Growth T or generate 38.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.72% |
| Values | Daily Returns |
Transamerica Growth T vs. Transamerica Multi Managed Bal
Performance |
| Timeline |
| Transamerica Growth |
| Transamerica Multi-managed |
Transamerica Growth and Transamerica Multi-managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Growth and Transamerica Multi-managed
The main advantage of trading using opposite Transamerica Growth and Transamerica Multi-managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Growth position performs unexpectedly, Transamerica Multi-managed 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 Transamerica Multi-managed will offset losses from the drop in Transamerica Multi-managed's long position.The idea behind Transamerica Growth T and Transamerica Multi Managed Balanced 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.
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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