Correlation Between Nasdaq-100(r) and Transamerica High

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Transamerica High 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 High 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 High Yield, you can compare the effects of market volatilities on Nasdaq-100(r) and Transamerica High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Transamerica High.

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

0.58

Correlation Coefficient

Nasdaq-100(r)  Transamerica High

Very weak diversification

The 3 months correlation between Nasdaq-100(r) and Transamerica is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Transamerica High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica High Yield 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica High Yield has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Transamerica High go up and down completely randomly.

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

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 11.78 times more return on investment than Transamerica High. However, Nasdaq-100(r) is 11.78 times more volatile than Transamerica High Yield. It trades about 0.07 of its potential returns per unit of risk. Transamerica High Yield is currently generating about 0.15 per unit of risk. If you would invest  54,694  in Nasdaq 100 2x Strategy on October 24, 2024 and sell it today you would earn a total of  4,499  from holding Nasdaq 100 2x Strategy or generate 8.23% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Transamerica High Yield

Nasdaq 100 2x

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nasdaq-100(r) may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Transamerica High Yield

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica High Yield are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Transamerica High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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

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

The idea behind Nasdaq 100 2x Strategy and Transamerica High Yield 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 Stocks Directory module to find actively traded stocks across global markets.