Correlation Between Transamerica Financial and Columbia Overseas

Can any of the company-specific risk be diversified away by investing in both Transamerica Financial and Columbia Overseas 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 Columbia Overseas 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 Columbia Overseas Value, you can compare the effects of market volatilities on Transamerica Financial and Columbia Overseas 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 Columbia Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Financial and Columbia Overseas.

Diversification Opportunities for Transamerica Financial and Columbia Overseas

-0.39

Correlation Coefficient

Transamerica Financial  Columbia Overseas

Very good diversification

The 3 months correlation between Transamerica and Columbia is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Columbia Overseas Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Overseas Value 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 Columbia Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Overseas Value has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Columbia Overseas go up and down completely randomly.

Pair Corralation between Transamerica Financial and Columbia Overseas

Assuming the 90 days horizon Transamerica Financial Life is expected to generate 0.87 times more return on investment than Columbia Overseas. However, Transamerica Financial Life is 1.15 times less risky than Columbia Overseas. It trades about 0.13 of its potential returns per unit of risk. Columbia Overseas Value is currently generating about -0.01 per unit of risk. If you would invest  1,154  in Transamerica Financial Life on September 12, 2024 and sell it today you would earn a total of  61.00  from holding Transamerica Financial Life or generate 5.29% return on investment over 90 days.

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

Transamerica Financial Life  vs.  Columbia Overseas Value

Transamerica Financial

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Financial Life are ranked lower than 10 (%) 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.

Columbia Overseas Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Overseas Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Columbia Overseas 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 Columbia Overseas

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

The idea behind Transamerica Financial Life and Columbia Overseas Value 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.