Correlation Between Federated Global and Transamerica Large

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

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

Diversification Opportunities for Federated Global and Transamerica Large

0.65

Correlation Coefficient

Federated Global  Transamerica Large

Poor diversification

The 3 months correlation between FEDERATED and Transamerica is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Federated Global Allocation 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 Federated Global 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 Federated Global Allocation 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 Federated Global i.e., Federated Global and Transamerica Large go up and down completely randomly.

Pair Corralation between Federated Global and Transamerica Large

Assuming the 90 days horizon Federated Global Allocation is expected to generate 0.15 times more return on investment than Transamerica Large. However, Federated Global Allocation is 6.5 times less risky than Transamerica Large. It trades about -0.29 of its potential returns per unit of risk. Transamerica Large Core is currently generating about -0.26 per unit of risk. If you would invest  2,020  in Federated Global Allocation on October 12, 2024 and sell it today you would lose (74.00) from holding Federated Global Allocation or give up 3.66% of portfolio value over 90 days.

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

Federated Global Allocation  vs.  Transamerica Large Core

Federated Global All

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Global Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Federated Global 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

0 of 100

Very Weak

Over the last 90 days Transamerica Large Core 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 Federated Global and Transamerica Large

The main advantage of trading using opposite Federated Global and Transamerica Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Global 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 Federated Global Allocation 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.