Correlation Between Transamerica Financial and Bts Managed

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

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

Diversification Opportunities for Transamerica Financial and Bts Managed

0.35

Correlation Coefficient

Transamerica Financial  Bts Managed

Weak diversification

The 3 months correlation between Transamerica and Bts is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Bts Managed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bts Managed Income and Transamerica Financial 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 Transamerica Financial Life are associated (or correlated) with Bts Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bts Managed Income has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Bts Managed go up and down completely randomly.

Pair Corralation between Transamerica Financial and Bts Managed

Assuming the 90 days horizon Transamerica Financial Life is expected to under-perform the Bts Managed. In addition to that, Transamerica Financial is 7.56 times more volatile than Bts Managed Income. It trades about -0.14 of its total potential returns per unit of risk. Bts Managed Income is currently generating about 0.15 per unit of volatility. If you would invest  956.00  in Bts Managed Income on October 21, 2024 and sell it today you would earn a total of  7.00  from holding Bts Managed Income or generate 0.73% return on investment over 90 days.

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

Transamerica Financial Life  vs.  Bts Managed Income

Transamerica Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica Financial Life has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Bts Managed Income

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Transamerica Financial and Bts Managed

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

The idea behind Transamerica Financial Life and Bts Managed Income 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.