Correlation Between Multimanager Lifestyle and Transamerica International

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

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

Diversification Opportunities for Multimanager Lifestyle and Transamerica International

0.8

Correlation Coefficient

Multimanager Lifestyle  Transamerica International

Very poor diversification

The 3 months correlation between Multimanager and Transamerica is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Multimanager Lifestyle Servati and Transamerica International Equ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica International and Multimanager Lifestyle 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 Multimanager Lifestyle Servative are associated (or correlated) with Transamerica International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica International has no effect on the direction of Multimanager Lifestyle i.e., Multimanager Lifestyle and Transamerica International go up and down completely randomly.

Pair Corralation between Multimanager Lifestyle and Transamerica International

Assuming the 90 days horizon Multimanager Lifestyle is expected to generate 6.67 times less return on investment than Transamerica International. But when comparing it to its historical volatility, Multimanager Lifestyle Servative is 3.98 times less risky than Transamerica International. It trades about 0.11 of its potential returns per unit of risk. Transamerica International Equity is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,084  in Transamerica International Equity on December 22, 2024 and sell it today you would earn a total of  232.00  from holding Transamerica International Equity or generate 11.13% return on investment over 90 days.

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

Multimanager Lifestyle Servati  vs.  Transamerica International Equ

Multimanager Lifestyle

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Multimanager Lifestyle Servative are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Multimanager Lifestyle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica International Equity are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Transamerica International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Multimanager Lifestyle and Transamerica International

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

The idea behind Multimanager Lifestyle Servative and Transamerica International 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.