Correlation Between Transamerica Large and Fidelity Stock
Can any of the company-specific risk be diversified away by investing in both Transamerica Large and Fidelity Stock 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 Fidelity Stock 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 Fidelity Stock Selector, you can compare the effects of market volatilities on Transamerica Large and Fidelity Stock 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 Fidelity Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Large and Fidelity Stock.
Diversification Opportunities for Transamerica Large and Fidelity Stock
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Transamerica and FIDELITY is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Large Cap and Fidelity Stock Selector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Stock Selector 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 Fidelity Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Stock Selector has no effect on the direction of Transamerica Large i.e., Transamerica Large and Fidelity Stock go up and down completely randomly.
Pair Corralation between Transamerica Large and Fidelity Stock
Assuming the 90 days horizon Transamerica Large is expected to generate 1.64 times less return on investment than Fidelity Stock. In addition to that, Transamerica Large is 1.02 times more volatile than Fidelity Stock Selector. It trades about 0.18 of its total potential returns per unit of risk. Fidelity Stock Selector is currently generating about 0.3 per unit of volatility. If you would invest 2,839 in Fidelity Stock Selector on August 28, 2024 and sell it today you would earn a total of 144.00 from holding Fidelity Stock Selector or generate 5.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Large Cap vs. Fidelity Stock Selector
Performance |
| Timeline |
| Transamerica Large Cap |
| Fidelity Stock Selector |
Transamerica Large and Fidelity Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Large and Fidelity Stock
The main advantage of trading using opposite Transamerica Large and Fidelity Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Large position performs unexpectedly, Fidelity Stock 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 Fidelity Stock will offset losses from the drop in Fidelity Stock's long position.The idea behind Transamerica Large Cap and Fidelity Stock Selector 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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