Correlation Between Dodge Income and Transamerica Flexible

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

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

Diversification Opportunities for Dodge Income and Transamerica Flexible

0.99

Correlation Coefficient

Dodge Income  Transamerica Flexible

No risk reduction

The 3 months correlation between Dodge and Transamerica is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Income Fund and Transamerica Flexible Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Flexible and Dodge Income 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 Dodge Income Fund are associated (or correlated) with Transamerica Flexible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Flexible has no effect on the direction of Dodge Income i.e., Dodge Income and Transamerica Flexible go up and down completely randomly.

Pair Corralation between Dodge Income and Transamerica Flexible

Assuming the 90 days horizon Dodge Income Fund is expected to generate 1.04 times more return on investment than Transamerica Flexible. However, Dodge Income is 1.04 times more volatile than Transamerica Flexible Income. It trades about 0.05 of its potential returns per unit of risk. Transamerica Flexible Income is currently generating about 0.03 per unit of risk. If you would invest  1,148  in Dodge Income Fund on October 5, 2024 and sell it today you would earn a total of  90.00  from holding Dodge Income Fund or generate 7.84% return on investment over 90 days.

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

Dodge Income Fund  vs.  Transamerica Flexible Income

Dodge Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Transamerica Flexible

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dodge Income and Transamerica Flexible

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

The idea behind Dodge Income Fund and Transamerica Flexible Income 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.