Correlation Between Nasdaq-100(r) and Transamerica Emerging

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Transamerica Emerging 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 Nasdaq-100(r) and Transamerica Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq 100 2x Strategy and Transamerica Emerging Markets, you can compare the effects of market volatilities on Nasdaq-100(r) and Transamerica Emerging 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 Nasdaq-100(r) with a short position of Transamerica Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Transamerica Emerging.

Diversification Opportunities for Nasdaq-100(r) and Transamerica Emerging

-0.56

Correlation Coefficient

Nasdaq-100(r)  Transamerica Emerging

Excellent diversification

The 3 months correlation between Nasdaq-100(r) and Transamerica is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Transamerica Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Emerging and Nasdaq-100(r) 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 Nasdaq 100 2x Strategy are associated (or correlated) with Transamerica Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Emerging has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Transamerica Emerging go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and Transamerica Emerging

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to under-perform the Transamerica Emerging. In addition to that, Nasdaq-100(r) is 2.78 times more volatile than Transamerica Emerging Markets. It trades about -0.11 of its total potential returns per unit of risk. Transamerica Emerging Markets is currently generating about 0.13 per unit of volatility. If you would invest  794.00  in Transamerica Emerging Markets on December 29, 2024 and sell it today you would earn a total of  65.00  from holding Transamerica Emerging Markets or generate 8.19% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Transamerica Emerging Markets

Nasdaq 100 2x

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq 100 2x Strategy 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 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 Emerging

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Emerging Markets are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Transamerica Emerging may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nasdaq-100(r) and Transamerica Emerging

The main advantage of trading using opposite Nasdaq-100(r) and Transamerica Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Transamerica Emerging 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 Emerging will offset losses from the drop in Transamerica Emerging's long position.

The idea behind Nasdaq 100 2x Strategy and Transamerica Emerging Markets 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.