Correlation Between Guidepath(r) Managed and Transamerica Financial

Can any of the company-specific risk be diversified away by investing in both Guidepath(r) Managed and Transamerica Financial 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 Guidepath(r) Managed and Transamerica Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guidepath Managed Futures and Transamerica Financial Life, you can compare the effects of market volatilities on Guidepath(r) Managed and Transamerica Financial 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 Guidepath(r) Managed with a short position of Transamerica Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidepath(r) Managed and Transamerica Financial.

Diversification Opportunities for Guidepath(r) Managed and Transamerica Financial

0.06

Correlation Coefficient

Guidepath(r) Managed  Transamerica Financial

Significant diversification

The 3 months correlation between Guidepath(r) and Transamerica is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Guidepath Managed Futures and Transamerica Financial Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Financial and Guidepath(r) Managed 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 Guidepath Managed Futures are associated (or correlated) with Transamerica Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Financial has no effect on the direction of Guidepath(r) Managed i.e., Guidepath(r) Managed and Transamerica Financial go up and down completely randomly.

Pair Corralation between Guidepath(r) Managed and Transamerica Financial

Assuming the 90 days horizon Guidepath Managed Futures is expected to under-perform the Transamerica Financial. In addition to that, Guidepath(r) Managed is 1.01 times more volatile than Transamerica Financial Life. It trades about -0.12 of its total potential returns per unit of risk. Transamerica Financial Life is currently generating about 0.04 per unit of volatility. If you would invest  1,070  in Transamerica Financial Life on December 25, 2024 and sell it today you would earn a total of  20.00  from holding Transamerica Financial Life or generate 1.87% return on investment over 90 days.

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

Guidepath Managed Futures  vs.  Transamerica Financial Life

Guidepath Managed Futures

Risk-Adjusted Performance

Very Weak

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

Transamerica Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Financial Life are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Transamerica Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guidepath(r) Managed and Transamerica Financial

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

The idea behind Guidepath Managed Futures and Transamerica Financial Life 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .