Correlation Between Income Stock and Transamerica Financial
Can any of the company-specific risk be diversified away by investing in both Income Stock and Transamerica Financial 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 Income Stock and Transamerica Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Stock Fund and Transamerica Financial Life, you can compare the effects of market volatilities on Income Stock and Transamerica Financial 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 Income Stock with a short position of Transamerica Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Stock and Transamerica Financial.
Diversification Opportunities for Income Stock and Transamerica Financial
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Income and Transamerica is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Income Stock Fund and Transamerica Financial Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Financial and Income Stock 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 Income Stock Fund are associated (or correlated) with Transamerica Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Financial has no effect on the direction of Income Stock i.e., Income Stock and Transamerica Financial go up and down completely randomly.
Pair Corralation between Income Stock and Transamerica Financial
Assuming the 90 days horizon Income Stock is expected to generate 1.01 times less return on investment than Transamerica Financial. In addition to that, Income Stock is 1.02 times more volatile than Transamerica Financial Life. It trades about 0.24 of its total potential returns per unit of risk. Transamerica Financial Life is currently generating about 0.25 per unit of volatility. If you would invest 1,185 in Transamerica Financial Life on August 29, 2024 and sell it today you would earn a total of 53.00 from holding Transamerica Financial Life or generate 4.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Stock Fund vs. Transamerica Financial Life
Performance |
| Timeline |
| Income Stock |
| Transamerica Financial |
Income Stock and Transamerica Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Stock and Transamerica Financial
The main advantage of trading using opposite Income Stock and Transamerica Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Stock position performs unexpectedly, Transamerica Financial 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 Transamerica Financial will offset losses from the drop in Transamerica Financial's long position.| Income Stock vs. Hennessy Nerstone Mid | Income Stock vs. Vanguard Small Cap Value | Income Stock vs. Mutual Of America | Income Stock vs. Applied Finance Explorer |
| Transamerica Financial vs. Vanguard Mid Cap Value | Transamerica Financial vs. HUMANA INC | Transamerica Financial vs. Aquagold International | Transamerica Financial vs. Barloworld Ltd ADR |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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