Correlation Between Mid-cap 15x and Transamerica Asset

Can any of the company-specific risk be diversified away by investing in both Mid-cap 15x and Transamerica Asset 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 Mid-cap 15x and Transamerica Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mid Cap 15x Strategy and Transamerica Asset Allocation, you can compare the effects of market volatilities on Mid-cap 15x and Transamerica Asset 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 Mid-cap 15x with a short position of Transamerica Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid-cap 15x and Transamerica Asset.

Diversification Opportunities for Mid-cap 15x and Transamerica Asset

0.78

Correlation Coefficient

Mid-cap 15x  Transamerica Asset

Poor diversification

The 3 months correlation between Mid-cap and Transamerica is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and Transamerica Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Asset and Mid-cap 15x 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 Mid Cap 15x Strategy are associated (or correlated) with Transamerica Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Asset has no effect on the direction of Mid-cap 15x i.e., Mid-cap 15x and Transamerica Asset go up and down completely randomly.

Pair Corralation between Mid-cap 15x and Transamerica Asset

Assuming the 90 days horizon Mid Cap 15x Strategy is expected to under-perform the Transamerica Asset. In addition to that, Mid-cap 15x is 1.64 times more volatile than Transamerica Asset Allocation. It trades about -0.1 of its total potential returns per unit of risk. Transamerica Asset Allocation is currently generating about -0.03 per unit of volatility. If you would invest  1,442  in Transamerica Asset Allocation on December 30, 2024 and sell it today you would lose (34.00) from holding Transamerica Asset Allocation or give up 2.36% of portfolio value over 90 days.

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

Mid Cap 15x Strategy  vs.  Transamerica Asset Allocation

Mid Cap 15x

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Cap 15x Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Transamerica Asset

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Mid-cap 15x and Transamerica Asset

The main advantage of trading using opposite Mid-cap 15x and Transamerica Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid-cap 15x position performs unexpectedly, Transamerica Asset 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 Asset will offset losses from the drop in Transamerica Asset's long position.

The idea behind Mid Cap 15x Strategy and Transamerica Asset Allocation 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.