Correlation Between Transamerica Large and Federated Emerging
Can any of the company-specific risk be diversified away by investing in both Transamerica Large and Federated Emerging 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 Federated Emerging 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 Federated Emerging Market, you can compare the effects of market volatilities on Transamerica Large and Federated Emerging 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 Federated Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Large and Federated Emerging.
Diversification Opportunities for Transamerica Large and Federated Emerging
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Transamerica and Federated is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Large Cap and Federated Emerging Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Emerging Market 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 Federated Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Emerging Market has no effect on the direction of Transamerica Large i.e., Transamerica Large and Federated Emerging go up and down completely randomly.
Pair Corralation between Transamerica Large and Federated Emerging
Assuming the 90 days horizon Transamerica Large Cap is expected to generate 1.94 times more return on investment than Federated Emerging. However, Transamerica Large is 1.94 times more volatile than Federated Emerging Market. It trades about 0.09 of its potential returns per unit of risk. Federated Emerging Market is currently generating about 0.12 per unit of risk. If you would invest 1,113 in Transamerica Large Cap on September 14, 2024 and sell it today you would earn a total of 415.00 from holding Transamerica Large Cap or generate 37.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Large Cap vs. Federated Emerging Market
Performance |
| Timeline |
| Transamerica Large Cap |
| Federated Emerging Market |
Transamerica Large and Federated Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Large and Federated Emerging
The main advantage of trading using opposite Transamerica Large and Federated Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Large position performs unexpectedly, Federated Emerging 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 Federated Emerging will offset losses from the drop in Federated Emerging's long position.The idea behind Transamerica Large Cap and Federated Emerging Market 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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