Correlation Between Transamerica Large and Small Cap
Can any of the company-specific risk be diversified away by investing in both Transamerica Large and Small Cap 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 Large and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Large Cap and Small Cap Equity, you can compare the effects of market volatilities on Transamerica Large and Small Cap 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 Large with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Large and Small Cap.
Diversification Opportunities for Transamerica Large and Small Cap
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Transamerica and Small is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Large Cap and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity and Transamerica Large 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 Large Cap are associated (or correlated) with Small Cap. 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 Equity has no effect on the direction of Transamerica Large i.e., Transamerica Large and Small Cap go up and down completely randomly.
Pair Corralation between Transamerica Large and Small Cap
Assuming the 90 days horizon Transamerica Large Cap is expected to generate 0.64 times more return on investment than Small Cap. However, Transamerica Large Cap is 1.56 times less risky than Small Cap. It trades about 0.05 of its potential returns per unit of risk. Small Cap Equity is currently generating about 0.02 per unit of risk. If you would invest 1,264 in Transamerica Large Cap on November 2, 2024 and sell it today you would earn a total of 245.00 from holding Transamerica Large Cap or generate 19.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Transamerica Large Cap vs. Small Cap Equity
Performance |
| Timeline |
| Transamerica Large Cap |
| Small Cap Equity |
Transamerica Large and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Large and Small Cap
The main advantage of trading using opposite Transamerica Large and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Large position performs unexpectedly, Small Cap 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 will offset losses from the drop in Small Cap's long position.| Transamerica Large vs. Artisan High Income | Transamerica Large vs. Needham Aggressive Growth | Transamerica Large vs. Gugg Actv Invmt | Transamerica Large vs. Siit High Yield |
| Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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