Correlation Between Transamerica Asset and Old Westbury

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

Diversification Opportunities for Transamerica Asset and Old Westbury

-0.33

Correlation Coefficient

Transamerica Asset  Old Westbury

Very good diversification

The 3 months correlation between Transamerica and Old is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Asset Allocation and Old Westbury Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Fixed 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 Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Fixed has no effect on the direction of Transamerica Asset i.e., Transamerica Asset and Old Westbury go up and down completely randomly.

Pair Corralation between Transamerica Asset and Old Westbury

Assuming the 90 days horizon Transamerica Asset is expected to generate 1.35 times less return on investment than Old Westbury. In addition to that, Transamerica Asset is 2.08 times more volatile than Old Westbury Fixed. It trades about 0.07 of its total potential returns per unit of risk. Old Westbury Fixed is currently generating about 0.2 per unit of volatility. If you would invest  1,010  in Old Westbury Fixed on September 12, 2024 and sell it today you would earn a total of  8.00  from holding Old Westbury Fixed or generate 0.79% return on investment over 90 days.

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

Transamerica Asset Allocation  vs.  Old Westbury Fixed

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.

Old Westbury Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Old Westbury Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Old Westbury 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 Asset and Old Westbury

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

The idea behind Transamerica Asset Allocation and Old Westbury Fixed 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.