Correlation Between Transamerica Large and State Street
Can any of the company-specific risk be diversified away by investing in both Transamerica Large and State Street 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 State Street 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 State Street Aggregate, you can compare the effects of market volatilities on Transamerica Large and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Large and State Street.
Diversification Opportunities for Transamerica Large and State Street
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Transamerica and State is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Large Cap and State Street Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Aggregate 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Aggregate has no effect on the direction of Transamerica Large i.e., Transamerica Large and State Street go up and down completely randomly.
Pair Corralation between Transamerica Large and State Street
Assuming the 90 days horizon Transamerica Large Cap is expected to under-perform the State Street. In addition to that, Transamerica Large is 2.34 times more volatile than State Street Aggregate. It trades about -0.1 of its total potential returns per unit of risk. State Street Aggregate is currently generating about 0.02 per unit of volatility. If you would invest 8,826 in State Street Aggregate on November 27, 2024 and sell it today you would earn a total of 30.00 from holding State Street Aggregate or generate 0.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Large Cap vs. State Street Aggregate
Performance |
| Timeline |
| Transamerica Large Cap |
| State Street Aggregate |
Transamerica Large and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Large and State Street
The main advantage of trading using opposite Transamerica Large and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Large position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| Transamerica Large vs. Aig Government Money | Transamerica Large vs. Inverse Government Long | Transamerica Large vs. Federated Government Income | Transamerica Large vs. Blackrock Government Bond |
| State Street vs. Guidemark E Fixed | State Street vs. Ultra Short Fixed Income | State Street vs. Pro Blend Servative Term | State Street vs. Doubleline Emerging Markets |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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