Correlation Between Short Precious and Transamerica Growth

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

By analyzing existing cross correlation between Short Precious Metals and Transamerica Growth T, you can compare the effects of market volatilities on Short Precious and Transamerica Growth 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 Short Precious with a short position of Transamerica Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Precious and Transamerica Growth.

Diversification Opportunities for Short Precious and Transamerica Growth

0.33

Correlation Coefficient

Short Precious  Transamerica Growth

Weak diversification

The 3 months correlation between Short and Transamerica is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Short Precious Metals and Transamerica Growth T in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Growth and Short Precious 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 Short Precious Metals are associated (or correlated) with Transamerica Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Growth has no effect on the direction of Short Precious i.e., Short Precious and Transamerica Growth go up and down completely randomly.

Pair Corralation between Short Precious and Transamerica Growth

Assuming the 90 days horizon Short Precious Metals is expected to under-perform the Transamerica Growth. In addition to that, Short Precious is 1.48 times more volatile than Transamerica Growth T. It trades about -0.22 of its total potential returns per unit of risk. Transamerica Growth T is currently generating about -0.17 per unit of volatility. If you would invest  12,971  in Transamerica Growth T on October 23, 2024 and sell it today you would lose (428.00) from holding Transamerica Growth T or give up 3.3% of portfolio value over 90 days.

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

Short Precious Metals  vs.  Transamerica Growth T

Short Precious Metals

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Short Precious Metals are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Short Precious showed solid returns over the last few months and may actually be approaching a breakup point.

Transamerica Growth

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Growth T are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transamerica Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Short Precious and Transamerica Growth

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

The idea behind Short Precious Metals and Transamerica Growth T 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.