Correlation Between Transamerica Mid and Transamerica Large

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

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

Diversification Opportunities for Transamerica Mid and Transamerica Large

0.95

Correlation Coefficient

Transamerica Mid  Transamerica Large

Almost no diversification

The 3 months correlation between Transamerica and Transamerica is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Mid Cap and Transamerica Large Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Core and Transamerica Mid 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 Mid Cap are associated (or correlated) with Transamerica Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Large Core has no effect on the direction of Transamerica Mid i.e., Transamerica Mid and Transamerica Large go up and down completely randomly.

Pair Corralation between Transamerica Mid and Transamerica Large

Assuming the 90 days horizon Transamerica Mid Cap is expected to generate 1.51 times more return on investment than Transamerica Large. However, Transamerica Mid is 1.51 times more volatile than Transamerica Large Core. It trades about 0.19 of its potential returns per unit of risk. Transamerica Large Core is currently generating about 0.22 per unit of risk. If you would invest  970.00  in Transamerica Mid Cap on September 12, 2024 and sell it today you would earn a total of  116.00  from holding Transamerica Mid Cap or generate 11.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Transamerica Mid Cap  vs.  Transamerica Large Core

Transamerica Mid Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Mid Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Transamerica Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Transamerica Large Core

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Large Core are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Transamerica Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Transamerica Mid and Transamerica Large

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

The idea behind Transamerica Mid Cap and Transamerica Large Core 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.