Correlation Between Federated Pennsylvania and Transamerica Large

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

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

Diversification Opportunities for Federated Pennsylvania and Transamerica Large

0.48

Correlation Coefficient

Federated Pennsylvania  Transamerica Large

Very weak diversification

The 3 months correlation between Federated and Transamerica is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Federated Pennsylvania Municip and Transamerica Large Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Growth and Federated Pennsylvania 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 Federated Pennsylvania Municipal are associated (or correlated) with Transamerica Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Large Growth has no effect on the direction of Federated Pennsylvania i.e., Federated Pennsylvania and Transamerica Large go up and down completely randomly.

Pair Corralation between Federated Pennsylvania and Transamerica Large

Assuming the 90 days horizon Federated Pennsylvania Municipal is expected to generate 0.08 times more return on investment than Transamerica Large. However, Federated Pennsylvania Municipal is 12.97 times less risky than Transamerica Large. It trades about -0.01 of its potential returns per unit of risk. Transamerica Large Growth is currently generating about -0.13 per unit of risk. If you would invest  1,008  in Federated Pennsylvania Municipal on December 2, 2024 and sell it today you would lose (2.00) from holding Federated Pennsylvania Municipal or give up 0.2% of portfolio value over 90 days.

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

Federated Pennsylvania Municip  vs.  Transamerica Large Growth

Federated Pennsylvania

Risk-Adjusted Performance

Very Weak

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

Transamerica Large Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica Large Growth 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 Federated Pennsylvania and Transamerica Large

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

The idea behind Federated Pennsylvania Municipal and Transamerica Large Growth 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.