Correlation Between Transamerica Financial and Quantitative

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

Diversification Opportunities for Transamerica Financial and Quantitative

0.8

Correlation Coefficient

Transamerica Financial  Quantitative

Very poor diversification

The 3 months correlation between Transamerica and Quantitative is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Quantitative U S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantitative U S 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 Quantitative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantitative U S has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Quantitative go up and down completely randomly.

Pair Corralation between Transamerica Financial and Quantitative

Assuming the 90 days horizon Transamerica Financial Life is expected to generate 0.81 times more return on investment than Quantitative. However, Transamerica Financial Life is 1.23 times less risky than Quantitative. It trades about -0.35 of its potential returns per unit of risk. Quantitative U S is currently generating about -0.32 per unit of risk. If you would invest  1,247  in Transamerica Financial Life on September 30, 2024 and sell it today you would lose (183.00) from holding Transamerica Financial Life or give up 14.68% of portfolio value over 90 days.

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

Transamerica Financial Life  vs.  Quantitative U S

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.

Quantitative U S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quantitative U S has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Transamerica Financial and Quantitative

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

The idea behind Transamerica Financial Life and Quantitative U S 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 Global Correlations module to find global opportunities by holding instruments from different markets.