Correlation Between Transamerica Large and American Funds
Can any of the company-specific risk be diversified away by investing in both Transamerica Large and American Funds 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 American Funds 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 American Funds 2060, you can compare the effects of market volatilities on Transamerica Large and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Large and American Funds.
Diversification Opportunities for Transamerica Large and American Funds
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Transamerica and American is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Large Cap and American Funds 2060 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2060 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2060 has no effect on the direction of Transamerica Large i.e., Transamerica Large and American Funds go up and down completely randomly.
Pair Corralation between Transamerica Large and American Funds
Assuming the 90 days horizon Transamerica Large is expected to generate 1.13 times less return on investment than American Funds. But when comparing it to its historical volatility, Transamerica Large Cap is 1.05 times less risky than American Funds. It trades about 0.09 of its potential returns per unit of risk. American Funds 2060 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,319 in American Funds 2060 on August 24, 2024 and sell it today you would earn a total of 536.00 from holding American Funds 2060 or generate 40.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Transamerica Large Cap vs. American Funds 2060
Performance |
| Timeline |
| Transamerica Large Cap |
| American Funds 2060 |
Transamerica Large and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Large and American Funds
The main advantage of trading using opposite Transamerica Large and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Large position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Transamerica Large vs. Gmo Emerging Country | Transamerica Large vs. Oklahoma College Savings | Transamerica Large vs. Ultra Short Term Fixed | Transamerica Large vs. Fundvantage Trust |
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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