Correlation Between Quantitative and Transamerica Large

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

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

Diversification Opportunities for Quantitative and Transamerica Large

0.85

Correlation Coefficient

Quantitative  Transamerica Large

Very poor diversification

The 3 months correlation between Quantitative and Transamerica is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Quantitative Longshort Equity and Transamerica Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Cap and Quantitative 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 Quantitative Longshort 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 Cap has no effect on the direction of Quantitative i.e., Quantitative and Transamerica Large go up and down completely randomly.

Pair Corralation between Quantitative and Transamerica Large

Assuming the 90 days horizon Quantitative Longshort Equity is expected to under-perform the Transamerica Large. In addition to that, Quantitative is 1.54 times more volatile than Transamerica Large Cap. It trades about -0.03 of its total potential returns per unit of risk. Transamerica Large Cap is currently generating about 0.02 per unit of volatility. If you would invest  1,520  in Transamerica Large Cap on October 24, 2024 and sell it today you would earn a total of  11.00  from holding Transamerica Large Cap or generate 0.72% return on investment over 90 days.

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

Quantitative Longshort Equity  vs.  Transamerica Large Cap

Quantitative Longshort

Risk-Adjusted Performance

0 of 100

Very Weak

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

Transamerica Large Cap

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Large Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Transamerica Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Quantitative and Transamerica Large

The main advantage of trading using opposite Quantitative and Transamerica Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantitative 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 Quantitative Longshort Equity and Transamerica Large 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.