Correlation Between Transamerica Financial and Guidemark Smallmid

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

Diversification Opportunities for Transamerica Financial and Guidemark Smallmid

0.66

Correlation Coefficient

Transamerica Financial  Guidemark Smallmid

Poor diversification

The 3 months correlation between Transamerica and Guidemark is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Guidemark Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark Smallmid Cap 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 Guidemark Smallmid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark Smallmid Cap has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Guidemark Smallmid go up and down completely randomly.

Pair Corralation between Transamerica Financial and Guidemark Smallmid

Assuming the 90 days horizon Transamerica Financial Life is expected to generate 0.92 times more return on investment than Guidemark Smallmid. However, Transamerica Financial Life is 1.08 times less risky than Guidemark Smallmid. It trades about -0.35 of its potential returns per unit of risk. Guidemark Smallmid Cap is currently generating about -0.33 per unit of risk. If you would invest  1,243  in Transamerica Financial Life on October 1, 2024 and sell it today you would lose (179.00) from holding Transamerica Financial Life or give up 14.4% of portfolio value over 90 days.

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

Transamerica Financial Life  vs.  Guidemark Smallmid Cap

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.

Guidemark Smallmid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guidemark Smallmid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Guidemark Smallmid 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 Guidemark Smallmid

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

The idea behind Transamerica Financial Life and Guidemark Smallmid 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.