Correlation Between Calamos Convertible and Transamerica Smallmid

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

By analyzing existing cross correlation between Calamos Vertible Fund and Transamerica Smallmid Cap, you can compare the effects of market volatilities on Calamos Convertible and Transamerica Smallmid 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 Calamos Convertible with a short position of Transamerica Smallmid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calamos Convertible and Transamerica Smallmid.

Diversification Opportunities for Calamos Convertible and Transamerica Smallmid

0.6

Correlation Coefficient

Calamos Convertible  Transamerica Smallmid

Poor diversification

The 3 months correlation between Calamos and Transamerica is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Calamos Vertible Fund and Transamerica Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Smallmid Cap and Calamos Convertible 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 Calamos Vertible Fund are associated (or correlated) with Transamerica Smallmid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Smallmid Cap has no effect on the direction of Calamos Convertible i.e., Calamos Convertible and Transamerica Smallmid go up and down completely randomly.

Pair Corralation between Calamos Convertible and Transamerica Smallmid

Assuming the 90 days horizon Calamos Vertible Fund is expected to under-perform the Transamerica Smallmid. But the mutual fund apears to be less risky and, when comparing its historical volatility, Calamos Vertible Fund is 1.01 times less risky than Transamerica Smallmid. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Transamerica Smallmid Cap is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,598  in Transamerica Smallmid Cap on December 23, 2024 and sell it today you would lose (59.00) from holding Transamerica Smallmid Cap or give up 2.27% of portfolio value over 90 days.

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

Calamos Vertible Fund  vs.  Transamerica Smallmid Cap

Calamos Convertible

Risk-Adjusted Performance

Very Weak

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

Transamerica Smallmid Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Calamos Convertible and Transamerica Smallmid

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

The idea behind Calamos Vertible Fund and Transamerica Smallmid Cap 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.