Correlation Between Transamerica Asset and Hood River

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

By analyzing existing cross correlation between Transamerica Asset Allocation and Hood River New, you can compare the effects of market volatilities on Transamerica Asset and Hood River 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 Asset with a short position of Hood River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Asset and Hood River.

Diversification Opportunities for Transamerica Asset and Hood River

0.85

Correlation Coefficient

Transamerica Asset  Hood River

Very poor diversification

The 3 months correlation between Transamerica and Hood is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Asset Allocation and Hood River New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hood River New and Transamerica Asset 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 Asset Allocation are associated (or correlated) with Hood River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hood River New has no effect on the direction of Transamerica Asset i.e., Transamerica Asset and Hood River go up and down completely randomly.

Pair Corralation between Transamerica Asset and Hood River

Assuming the 90 days horizon Transamerica Asset is expected to generate 4.6 times less return on investment than Hood River. But when comparing it to its historical volatility, Transamerica Asset Allocation is 2.49 times less risky than Hood River. It trades about 0.14 of its potential returns per unit of risk. Hood River New is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,149  in Hood River New on September 12, 2024 and sell it today you would earn a total of  236.00  from holding Hood River New or generate 20.54% return on investment over 90 days.

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

Transamerica Asset Allocation  vs.  Hood River New

Transamerica Asset

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Asset Allocation are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transamerica Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hood River New

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hood River New are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Hood River showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transamerica Asset and Hood River

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

The idea behind Transamerica Asset Allocation and Hood River New 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.