Correlation Between Cutler Equity and Transamerica Large

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

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

Diversification Opportunities for Cutler Equity and Transamerica Large

0.88

Correlation Coefficient

Cutler Equity  Transamerica Large

Very poor diversification

The 3 months correlation between Cutler and Transamerica is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cutler Equity and Transamerica Large Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Value and Cutler Equity 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 Cutler Equity 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 Value has no effect on the direction of Cutler Equity i.e., Cutler Equity and Transamerica Large go up and down completely randomly.

Pair Corralation between Cutler Equity and Transamerica Large

Assuming the 90 days horizon Cutler Equity is expected to generate 0.38 times more return on investment than Transamerica Large. However, Cutler Equity is 2.61 times less risky than Transamerica Large. It trades about -0.09 of its potential returns per unit of risk. Transamerica Large Value is currently generating about -0.11 per unit of risk. If you would invest  2,852  in Cutler Equity on October 20, 2024 and sell it today you would lose (147.00) from holding Cutler Equity or give up 5.15% of portfolio value over 90 days.

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

Cutler Equity  vs.  Transamerica Large Value

Cutler Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Transamerica Large Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica Large Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Cutler Equity and Transamerica Large

The main advantage of trading using opposite Cutler Equity and Transamerica Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cutler Equity 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 Cutler Equity and Transamerica Large Value 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.