Correlation Between Transamerica Financial and Riverfront Asset

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

Diversification Opportunities for Transamerica Financial and Riverfront Asset

0.73

Correlation Coefficient

Transamerica Financial  Riverfront Asset

Poor diversification

The 3 months correlation between Transamerica and Riverfront is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Riverfront Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverfront Asset All 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 Riverfront Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverfront Asset All has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Riverfront Asset go up and down completely randomly.

Pair Corralation between Transamerica Financial and Riverfront Asset

Assuming the 90 days horizon Transamerica Financial Life is expected to under-perform the Riverfront Asset. In addition to that, Transamerica Financial is 2.08 times more volatile than Riverfront Asset Allocation. It trades about -0.06 of its total potential returns per unit of risk. Riverfront Asset Allocation is currently generating about 0.01 per unit of volatility. If you would invest  1,412  in Riverfront Asset Allocation on October 24, 2024 and sell it today you would earn a total of  4.00  from holding Riverfront Asset Allocation or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.78%
Values	Daily Returns

Transamerica Financial Life  vs.  Riverfront Asset Allocation

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 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.

Riverfront Asset All

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Riverfront Asset Allocation are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Riverfront Asset 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 Riverfront Asset

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

The idea behind Transamerica Financial Life and Riverfront Asset Allocation 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.