Correlation Between Hunter Small and Transamerica International

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

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

Diversification Opportunities for Hunter Small and Transamerica International

0.43

Correlation Coefficient

Hunter Small  Transamerica International

Very weak diversification

The 3 months correlation between Hunter and Transamerica is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Hunter Small Cap and Transamerica International Gro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica International and Hunter Small 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 Hunter Small Cap are associated (or correlated) with Transamerica International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica International has no effect on the direction of Hunter Small i.e., Hunter Small and Transamerica International go up and down completely randomly.

Pair Corralation between Hunter Small and Transamerica International

Assuming the 90 days horizon Hunter Small Cap is expected to under-perform the Transamerica International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Hunter Small Cap is 1.08 times less risky than Transamerica International. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Transamerica International Growth is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  652.00  in Transamerica International Growth on December 23, 2024 and sell it today you would earn a total of  6.00  from holding Transamerica International Growth or generate 0.92% return on investment over 90 days.

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

Hunter Small Cap  vs.  Transamerica International Gro

Hunter Small Cap

Risk-Adjusted Performance

Very Weak

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

Transamerica International

Risk-Adjusted Performance

Weak

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

Pair Trading with Hunter Small and Transamerica International

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

The idea behind Hunter Small Cap and Transamerica International Growth 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.