Correlation Between Transamerica Growth and Transamerica Asset
Can any of the company-specific risk be diversified away by investing in both Transamerica Growth and Transamerica 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 Growth and Transamerica Asset 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 Asset Allocation, you can compare the effects of market volatilities on Transamerica Growth and Transamerica 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 Growth with a short position of Transamerica Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Growth and Transamerica Asset.
Diversification Opportunities for Transamerica Growth and Transamerica Asset
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Transamerica and Transamerica is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Growth T and Transamerica Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Asset 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 Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Asset has no effect on the direction of Transamerica Growth i.e., Transamerica Growth and Transamerica Asset go up and down completely randomly.
Pair Corralation between Transamerica Growth and Transamerica Asset
Assuming the 90 days horizon Transamerica Growth T is expected to generate 1.96 times more return on investment than Transamerica Asset. However, Transamerica Growth is 1.96 times more volatile than Transamerica Asset Allocation. It trades about 0.27 of its potential returns per unit of risk. Transamerica Asset Allocation is currently generating about 0.36 per unit of risk. If you would invest 12,055 in Transamerica Growth T on September 1, 2024 and sell it today you would earn a total of 686.00 from holding Transamerica Growth T or generate 5.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Growth T vs. Transamerica Asset Allocation
Performance |
| Timeline |
| Transamerica Growth |
| Transamerica Asset |
Transamerica Growth and Transamerica Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Growth and Transamerica Asset
The main advantage of trading using opposite Transamerica Growth and Transamerica Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Growth position performs unexpectedly, Transamerica 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 Transamerica Asset will offset losses from the drop in Transamerica Asset's long position.| Transamerica Growth vs. Icon Financial Fund | Transamerica Growth vs. Mesirow Financial Small | Transamerica Growth vs. Blackrock Financial Institutions | Transamerica Growth vs. Davis Financial Fund |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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