Correlation Between Growth Portfolio and Transamerica Small/mid

Can any of the company-specific risk be diversified away by investing in both Growth Portfolio and Transamerica Small/mid 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 Growth Portfolio and Transamerica Small/mid into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Growth Portfolio Class and Transamerica Smallmid Cap, you can compare the effects of market volatilities on Growth Portfolio and Transamerica Small/mid 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 Growth Portfolio with a short position of Transamerica Small/mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Portfolio and Transamerica Small/mid.

Diversification Opportunities for Growth Portfolio and Transamerica Small/mid

-0.09

Correlation Coefficient

Growth Portfolio  Transamerica Small/mid

Good diversification

The 3 months correlation between Growth and Transamerica is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Growth Portfolio Class and Transamerica Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Smallmid Cap and Growth Portfolio 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 Growth Portfolio Class are associated (or correlated) with Transamerica Small/mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Smallmid Cap has no effect on the direction of Growth Portfolio i.e., Growth Portfolio and Transamerica Small/mid go up and down completely randomly.

Pair Corralation between Growth Portfolio and Transamerica Small/mid

Assuming the 90 days horizon Growth Portfolio Class is expected to generate 1.2 times more return on investment than Transamerica Small/mid. However, Growth Portfolio is 1.2 times more volatile than Transamerica Smallmid Cap. It trades about -0.01 of its potential returns per unit of risk. Transamerica Smallmid Cap is currently generating about -0.19 per unit of risk. If you would invest  5,231  in Growth Portfolio Class on December 2, 2024 and sell it today you would lose (118.00) from holding Growth Portfolio Class or give up 2.26% of portfolio value over 90 days.

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

Growth Portfolio Class  vs.  Transamerica Smallmid Cap

Growth Portfolio Class

Risk-Adjusted Performance

Very Weak

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

Transamerica Smallmid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica Smallmid Cap 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Growth Portfolio and Transamerica Small/mid

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

The idea behind Growth Portfolio Class and Transamerica Smallmid Cap 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.