Correlation Between Gmo Alternative and Transamerica Small

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

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

Diversification Opportunities for Gmo Alternative and Transamerica Small

-0.57

Correlation Coefficient

Gmo Alternative  Transamerica Small

Excellent diversification

The 3 months correlation between Gmo and Transamerica is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Alternative Allocation and Transamerica Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Small Cap and Gmo Alternative 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 Gmo Alternative Allocation are associated (or correlated) with Transamerica Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Small Cap has no effect on the direction of Gmo Alternative i.e., Gmo Alternative and Transamerica Small go up and down completely randomly.

Pair Corralation between Gmo Alternative and Transamerica Small

Assuming the 90 days horizon Gmo Alternative Allocation is expected to generate 0.31 times more return on investment than Transamerica Small. However, Gmo Alternative Allocation is 3.23 times less risky than Transamerica Small. It trades about 0.08 of its potential returns per unit of risk. Transamerica Small Cap is currently generating about -0.21 per unit of risk. If you would invest  1,713  in Gmo Alternative Allocation on December 2, 2024 and sell it today you would earn a total of  47.00  from holding Gmo Alternative Allocation or generate 2.74% return on investment over 90 days.

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

Gmo Alternative Allocation  vs.  Transamerica Small Cap

Gmo Alternative Allo

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Alternative Allocation are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Gmo Alternative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica Small Cap 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Gmo Alternative and Transamerica Small

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

The idea behind Gmo Alternative Allocation and Transamerica Small 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.