Correlation Between Westwood Smidcap and Transamerica Asset
Can any of the company-specific risk be diversified away by investing in both Westwood Smidcap and Transamerica Asset 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 Westwood Smidcap and Transamerica Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westwood Smidcap Fund and Transamerica Asset Allocation, you can compare the effects of market volatilities on Westwood Smidcap and Transamerica Asset 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 Westwood Smidcap with a short position of Transamerica Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Smidcap and Transamerica Asset.
Diversification Opportunities for Westwood Smidcap and Transamerica Asset
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Westwood and Transamerica is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Smidcap Fund and Transamerica Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Asset and Westwood Smidcap 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 Westwood Smidcap Fund are associated (or correlated) with Transamerica Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Asset has no effect on the direction of Westwood Smidcap i.e., Westwood Smidcap and Transamerica Asset go up and down completely randomly.
Pair Corralation between Westwood Smidcap and Transamerica Asset
Assuming the 90 days horizon Westwood Smidcap Fund is expected to generate 1.78 times more return on investment than Transamerica Asset. However, Westwood Smidcap is 1.78 times more volatile than Transamerica Asset Allocation. It trades about 0.06 of its potential returns per unit of risk. Transamerica Asset Allocation is currently generating about 0.1 per unit of risk. If you would invest 1,398 in Westwood Smidcap Fund on September 12, 2024 and sell it today you would earn a total of 298.00 from holding Westwood Smidcap Fund or generate 21.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westwood Smidcap Fund vs. Transamerica Asset Allocation
Performance |
| Timeline |
| Westwood Smidcap |
| Transamerica Asset |
Westwood Smidcap and Transamerica Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westwood Smidcap and Transamerica Asset
The main advantage of trading using opposite Westwood Smidcap and Transamerica Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westwood Smidcap position performs unexpectedly, Transamerica Asset 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 Asset will offset losses from the drop in Transamerica Asset's long position.| Westwood Smidcap vs. Dreyfusstandish Global Fixed | Westwood Smidcap vs. Dws Government Money | Westwood Smidcap vs. Multisector Bond Sma | Westwood Smidcap vs. Bbh Intermediate Municipal |
| Transamerica Asset vs. Calvert Moderate Allocation | Transamerica Asset vs. Qs Moderate Growth | Transamerica Asset vs. College Retirement Equities | Transamerica Asset vs. Sa Worldwide Moderate |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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