Correlation Between Transamerica Financial and Wasatch Micro

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

Diversification Opportunities for Transamerica Financial and Wasatch Micro

-0.28

Correlation Coefficient

Transamerica Financial  Wasatch Micro

Very good diversification

The 3 months correlation between Transamerica and Wasatch is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Wasatch Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Micro 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 Wasatch Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Micro Cap has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Wasatch Micro go up and down completely randomly.

Pair Corralation between Transamerica Financial and Wasatch Micro

Assuming the 90 days horizon Transamerica Financial Life is expected to generate 0.64 times more return on investment than Wasatch Micro. However, Transamerica Financial Life is 1.56 times less risky than Wasatch Micro. It trades about 0.04 of its potential returns per unit of risk. Wasatch Micro Cap is currently generating about -0.23 per unit of risk. If you would invest  1,059  in Transamerica Financial Life on December 23, 2024 and sell it today you would earn a total of  19.00  from holding Transamerica Financial Life or generate 1.79% 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.  Wasatch Micro Cap

Transamerica Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Financial Life are ranked lower than 3 (%) 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.

Wasatch Micro Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wasatch Micro Cap 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 fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Transamerica Financial and Wasatch Micro

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

The idea behind Transamerica Financial Life and Wasatch Micro 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.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.