Correlation Between Pace Smallmedium and Transamerica Large

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

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

Diversification Opportunities for Pace Smallmedium and Transamerica Large

0.89

Correlation Coefficient

Pace Smallmedium  Transamerica Large

Very poor diversification

The 3 months correlation between Pace and Transamerica is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Pace Smallmedium Value and Transamerica Large Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Value and Pace Smallmedium 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 Pace Smallmedium Value 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 Value has no effect on the direction of Pace Smallmedium i.e., Pace Smallmedium and Transamerica Large go up and down completely randomly.

Pair Corralation between Pace Smallmedium and Transamerica Large

Assuming the 90 days horizon Pace Smallmedium Value is expected to under-perform the Transamerica Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pace Smallmedium Value is 1.01 times less risky than Transamerica Large. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Transamerica Large Value is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,074  in Transamerica Large Value on October 21, 2024 and sell it today you would lose (122.00) from holding Transamerica Large Value or give up 11.36% of portfolio value over 90 days.

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

Pace Smallmedium Value  vs.  Transamerica Large Value

Pace Smallmedium Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pace Smallmedium Value 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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Transamerica Large Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica Large Value 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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Pace Smallmedium and Transamerica Large

The main advantage of trading using opposite Pace Smallmedium and Transamerica Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Smallmedium 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 Pace Smallmedium Value and Transamerica Large Value 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.