Correlation Between Short Duration and Transamerica Large

Can any of the company-specific risk be diversified away by investing in both Short Duration and Transamerica Large 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 Short Duration and Transamerica Large into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Short Duration Inflation and Transamerica Large Core, you can compare the effects of market volatilities on Short Duration and Transamerica Large 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 Short Duration with a short position of Transamerica Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Duration and Transamerica Large.

Diversification Opportunities for Short Duration and Transamerica Large

-0.11

Correlation Coefficient

Short Duration  Transamerica Large

Good diversification

The 3 months correlation between Short and Transamerica is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Short Duration Inflation and Transamerica Large Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Core and Short Duration 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 Short Duration Inflation are associated (or correlated) with Transamerica Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Large Core has no effect on the direction of Short Duration i.e., Short Duration and Transamerica Large go up and down completely randomly.

Pair Corralation between Short Duration and Transamerica Large

Assuming the 90 days horizon Short Duration is expected to generate 75.56 times less return on investment than Transamerica Large. But when comparing it to its historical volatility, Short Duration Inflation is 4.64 times less risky than Transamerica Large. It trades about 0.01 of its potential returns per unit of risk. Transamerica Large Core is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,304  in Transamerica Large Core on September 13, 2024 and sell it today you would earn a total of  103.00  from holding Transamerica Large Core or generate 7.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Short Duration Inflation  vs.  Transamerica Large Core

Short Duration Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Duration Inflation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Short Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica Large Core

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Large Core are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Transamerica Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Short Duration and Transamerica Large

The main advantage of trading using opposite Short Duration and Transamerica Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Duration position performs unexpectedly, Transamerica Large 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 Large will offset losses from the drop in Transamerica Large's long position.

The idea behind Short Duration Inflation and Transamerica Large Core 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.