Correlation Between M Large and Transamerica High

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

By analyzing existing cross correlation between M Large Cap and Transamerica High Yield, you can compare the effects of market volatilities on M Large and Transamerica High 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 M Large with a short position of Transamerica High. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Large and Transamerica High.

Diversification Opportunities for M Large and Transamerica High

-0.35

Correlation Coefficient

M Large  Transamerica High

Very good diversification

The 3 months correlation between MTCGX and Transamerica is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Transamerica High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica High Yield and M Large 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 M Large Cap are associated (or correlated) with Transamerica High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica High Yield has no effect on the direction of M Large i.e., M Large and Transamerica High go up and down completely randomly.

Pair Corralation between M Large and Transamerica High

Assuming the 90 days horizon M Large Cap is expected to under-perform the Transamerica High. In addition to that, M Large is 8.82 times more volatile than Transamerica High Yield. It trades about -0.14 of its total potential returns per unit of risk. Transamerica High Yield is currently generating about 0.14 per unit of volatility. If you would invest  1,043  in Transamerica High Yield on December 24, 2024 and sell it today you would earn a total of  20.00  from holding Transamerica High Yield or generate 1.92% return on investment over 90 days.

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

M Large Cap  vs.  Transamerica High Yield

M Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days M Large 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 technical and fundamental 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.

Transamerica High Yield

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica High Yield are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transamerica High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with M Large and Transamerica High

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

The idea behind M Large Cap and Transamerica High Yield 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.