Correlation Between Transamerica Financial and Jennison Natural

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

Diversification Opportunities for Transamerica Financial and Jennison Natural

0.35
  Correlation Coefficient

Weak diversification

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

Pair Corralation between Transamerica Financial and Jennison Natural

Assuming the 90 days horizon Transamerica Financial Life is expected to generate 0.64 times more return on investment than Jennison Natural. However, Transamerica Financial Life is 1.57 times less risky than Jennison Natural. It trades about 0.04 of its potential returns per unit of risk. Jennison Natural Resources is currently generating about 0.0 per unit of risk. If you would invest  984.00  in Transamerica Financial Life on September 24, 2024 and sell it today you would earn a total of  182.00  from holding Transamerica Financial Life or generate 18.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Transamerica Financial Life  vs.  Jennison Natural Resources

 Performance 
       Timeline  
Transamerica Financial 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 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.
Jennison Natural Res 

Risk-Adjusted Performance

0 of 100

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

Transamerica Financial and Jennison Natural Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Transamerica Financial and Jennison Natural

The main advantage of trading using opposite Transamerica Financial and Jennison Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Financial position performs unexpectedly, Jennison Natural 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 Jennison Natural will offset losses from the drop in Jennison Natural's long position.
The idea behind Transamerica Financial Life and Jennison Natural Resources 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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