Correlation Between Transamerica Multi-managed and Columbia Dividend

Can any of the company-specific risk be diversified away by investing in both Transamerica Multi-managed and Columbia Dividend 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 Multi-managed and Columbia Dividend into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transamerica Multi Managed Balanced and Columbia Dividend Opportunity, you can compare the effects of market volatilities on Transamerica Multi-managed and Columbia Dividend 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 Multi-managed with a short position of Columbia Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Multi-managed and Columbia Dividend.

Diversification Opportunities for Transamerica Multi-managed and Columbia Dividend

0.58

Correlation Coefficient

Transamerica Multi-managed  Columbia Dividend

Very weak diversification

The 3 months correlation between Transamerica and Columbia is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Multi Managed Bal and Columbia Dividend Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Dividend and Transamerica Multi-managed 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 Multi Managed Balanced are associated (or correlated) with Columbia Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Dividend has no effect on the direction of Transamerica Multi-managed i.e., Transamerica Multi-managed and Columbia Dividend go up and down completely randomly.

Pair Corralation between Transamerica Multi-managed and Columbia Dividend

Assuming the 90 days horizon Transamerica Multi Managed Balanced is expected to under-perform the Columbia Dividend. But the mutual fund apears to be less risky and, when comparing its historical volatility, Transamerica Multi Managed Balanced is 1.05 times less risky than Columbia Dividend. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Columbia Dividend Opportunity is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,138  in Columbia Dividend Opportunity on December 2, 2024 and sell it today you would lose (152.00) from holding Columbia Dividend Opportunity or give up 3.67% of portfolio value over 90 days.

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

Transamerica Multi Managed Bal  vs.  Columbia Dividend Opportunity

Transamerica Multi-managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica Multi Managed Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Columbia Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Dividend Opportunity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Columbia Dividend 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 Multi-managed and Columbia Dividend

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

The idea behind Transamerica Multi Managed Balanced and Columbia Dividend Opportunity 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.