Correlation Between Balanced Strategy and Transamerica Financial

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Balanced Strategy and Transamerica Financial 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 Balanced Strategy and Transamerica Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Strategy Fund and Transamerica Financial Life, you can compare the effects of market volatilities on Balanced Strategy and Transamerica Financial 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 Balanced Strategy with a short position of Transamerica Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Strategy and Transamerica Financial.

Diversification Opportunities for Balanced Strategy and Transamerica Financial

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Balanced and Transamerica is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and Transamerica Financial Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Financial and Balanced Strategy 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 Balanced Strategy Fund are associated (or correlated) with Transamerica Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Financial has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and Transamerica Financial go up and down completely randomly.

Pair Corralation between Balanced Strategy and Transamerica Financial

Assuming the 90 days horizon Balanced Strategy is expected to generate 3.61 times less return on investment than Transamerica Financial. But when comparing it to its historical volatility, Balanced Strategy Fund is 1.09 times less risky than Transamerica Financial. It trades about 0.07 of its potential returns per unit of risk. Transamerica Financial Life is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,059  in Transamerica Financial Life on October 23, 2024 and sell it today you would earn a total of  27.00  from holding Transamerica Financial Life or generate 2.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Balanced Strategy Fund  vs.  Transamerica Financial Life

 Performance 
       Timeline  
Balanced Strategy 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Balanced Strategy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Balanced Strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Transamerica Financial 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Transamerica Financial Life has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Balanced Strategy and Transamerica Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Balanced Strategy and Transamerica Financial

The main advantage of trading using opposite Balanced Strategy and Transamerica Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Strategy position performs unexpectedly, Transamerica Financial 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 Financial will offset losses from the drop in Transamerica Financial's long position.
The idea behind Balanced Strategy Fund and Transamerica Financial Life 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.
Check out your portfolio center.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

Other Complementary Tools

Stock Screener
Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
CEOs Directory
Screen CEOs from public companies around the world
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities