Correlation Between Transamerica Mid and Transamerica Intl

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

Diversification Opportunities for Transamerica Mid and Transamerica Intl

-0.34

Correlation Coefficient

Transamerica Mid  Transamerica Intl

Very good diversification

The 3 months correlation between Transamerica and Transamerica is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Mid Cap and Transamerica Intl Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Intl Equity 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 Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Intl Equity has no effect on the direction of Transamerica Mid i.e., Transamerica Mid and Transamerica Intl go up and down completely randomly.

Pair Corralation between Transamerica Mid and Transamerica Intl

Assuming the 90 days horizon Transamerica Mid Cap is expected to under-perform the Transamerica Intl. In addition to that, Transamerica Mid is 1.85 times more volatile than Transamerica Intl Equity. It trades about -0.2 of its total potential returns per unit of risk. Transamerica Intl Equity is currently generating about -0.29 per unit of volatility. If you would invest  2,164  in Transamerica Intl Equity on September 29, 2024 and sell it today you would lose (108.00) from holding Transamerica Intl Equity or give up 4.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Transamerica Mid Cap  vs.  Transamerica Intl Equity

Transamerica Mid Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Mid Cap are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Transamerica Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica Intl Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica Intl Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Transamerica Mid and Transamerica Intl

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

The idea behind Transamerica Mid Cap and Transamerica Intl Equity 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.