Correlation Between Transamerica Asset and Transamerica Cleartrack

Can any of the company-specific risk be diversified away by investing in both Transamerica Asset and Transamerica Cleartrack 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 Transamerica Cleartrack 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 Transamerica Cleartrack 2055, you can compare the effects of market volatilities on Transamerica Asset and Transamerica Cleartrack 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 Transamerica Cleartrack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Asset and Transamerica Cleartrack.

Diversification Opportunities for Transamerica Asset and Transamerica Cleartrack

0.68

Correlation Coefficient

Transamerica Asset  Transamerica Cleartrack

Poor diversification

The 3 months correlation between Transamerica and Transamerica is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Asset Allocation and Transamerica Cleartrack 2055 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Cleartrack 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 Transamerica Cleartrack. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Cleartrack has no effect on the direction of Transamerica Asset i.e., Transamerica Asset and Transamerica Cleartrack go up and down completely randomly.

Pair Corralation between Transamerica Asset and Transamerica Cleartrack

Assuming the 90 days horizon Transamerica Asset Allocation is expected to under-perform the Transamerica Cleartrack. But the mutual fund apears to be less risky and, when comparing its historical volatility, Transamerica Asset Allocation is 1.05 times less risky than Transamerica Cleartrack. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Transamerica Cleartrack 2055 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,055  in Transamerica Cleartrack 2055 on December 27, 2024 and sell it today you would earn a total of  11.00  from holding Transamerica Cleartrack 2055 or generate 1.04% return on investment over 90 days.

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

Transamerica Asset Allocation  vs.  Transamerica Cleartrack 2055

Transamerica Asset

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica Asset Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Transamerica Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica Cleartrack

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Cleartrack 2055 are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transamerica Cleartrack 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 Transamerica Cleartrack

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

The idea behind Transamerica Asset Allocation and Transamerica Cleartrack 2055 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.