Correlation Between International Business and Transamerica Funds

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

By analyzing existing cross correlation between International Business Machines and Transamerica Funds , you can compare the effects of market volatilities on International Business and Transamerica Funds 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 International Business with a short position of Transamerica Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Transamerica Funds.

Diversification Opportunities for International Business and Transamerica Funds

0.17

Correlation Coefficient

International Business  Transamerica Funds

Average diversification

The 3 months correlation between International and Transamerica is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Transamerica Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Funds and International Business 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 International Business Machines are associated (or correlated) with Transamerica Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Funds has no effect on the direction of International Business i.e., International Business and Transamerica Funds go up and down completely randomly.

Pair Corralation between International Business and Transamerica Funds

Considering the 90-day investment horizon International Business Machines is expected to generate 1.62 times more return on investment than Transamerica Funds. However, International Business is 1.62 times more volatile than Transamerica Funds . It trades about 0.12 of its potential returns per unit of risk. Transamerica Funds is currently generating about 0.02 per unit of risk. If you would invest  11,474  in International Business Machines on October 5, 2024 and sell it today you would earn a total of  10,520  from holding International Business Machines or generate 91.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.36%
Values	Daily Returns

International Business Machine  vs.  Transamerica Funds

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, International Business is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Transamerica Funds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica Funds 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.

Pair Trading with International Business and Transamerica Funds

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

The idea behind International Business Machines and Transamerica Funds 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..