Correlation Between Invesco International and Transamerica Financial

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

By analyzing existing cross correlation between Invesco International Diversified and Transamerica Financial Life, you can compare the effects of market volatilities on Invesco International and Transamerica Financial 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 Invesco International with a short position of Transamerica Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco International and Transamerica Financial.

Diversification Opportunities for Invesco International and Transamerica Financial

0.61

Correlation Coefficient

Invesco International  Transamerica Financial

Poor diversification

The 3 months correlation between Invesco and Transamerica is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Invesco International Diversif and Transamerica Financial Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Financial and Invesco International 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 Invesco International Diversified are associated (or correlated) with Transamerica Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Financial has no effect on the direction of Invesco International i.e., Invesco International and Transamerica Financial go up and down completely randomly.

Pair Corralation between Invesco International and Transamerica Financial

Assuming the 90 days horizon Invesco International Diversified is expected to under-perform the Transamerica Financial. But the mutual fund apears to be less risky and, when comparing its historical volatility, Invesco International Diversified is 1.41 times less risky than Transamerica Financial. The mutual fund trades about -0.21 of its potential returns per unit of risk. The Transamerica Financial Life is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,172  in Transamerica Financial Life on October 8, 2024 and sell it today you would lose (110.00) from holding Transamerica Financial Life or give up 9.39% of portfolio value over 90 days.

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

Invesco International Diversif  vs.  Transamerica Financial Life

Invesco International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco International Diversified has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Transamerica Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica Financial Life has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental 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 Invesco International and Transamerica Financial

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

The idea behind Invesco International Diversified and Transamerica Financial Life 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.