Correlation Between Mesirow Financial and Transamerica Growth

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

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

Diversification Opportunities for Mesirow Financial and Transamerica Growth

0.7

Correlation Coefficient

Mesirow Financial  Transamerica Growth

Poor diversification

The 3 months correlation between Mesirow and Transamerica is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Mesirow Financial Small and Transamerica Growth T in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Growth and Mesirow Financial 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 Mesirow Financial Small are associated (or correlated) with Transamerica Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Growth has no effect on the direction of Mesirow Financial i.e., Mesirow Financial and Transamerica Growth go up and down completely randomly.

Pair Corralation between Mesirow Financial and Transamerica Growth

Assuming the 90 days horizon Mesirow Financial Small is expected to under-perform the Transamerica Growth. In addition to that, Mesirow Financial is 3.1 times more volatile than Transamerica Growth T. It trades about -0.17 of its total potential returns per unit of risk. Transamerica Growth T is currently generating about 0.41 per unit of volatility. If you would invest  12,437  in Transamerica Growth T on September 19, 2024 and sell it today you would earn a total of  871.00  from holding Transamerica Growth T or generate 7.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Mesirow Financial Small  vs.  Transamerica Growth T

Mesirow Financial Small

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mesirow Financial Small are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Mesirow Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica Growth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Growth T are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Transamerica Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mesirow Financial and Transamerica Growth

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

The idea behind Mesirow Financial Small and Transamerica Growth T 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.