Correlation Between Sarofim Equity and Transamerica Cleartrack

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

By analyzing existing cross correlation between Sarofim Equity and Transamerica Cleartrack Retirement, you can compare the effects of market volatilities on Sarofim Equity and Transamerica Cleartrack 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 Sarofim Equity with a short position of Transamerica Cleartrack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sarofim Equity and Transamerica Cleartrack.

Diversification Opportunities for Sarofim Equity and Transamerica Cleartrack

0.63

Correlation Coefficient

Sarofim Equity  Transamerica Cleartrack

Poor diversification

The 3 months correlation between Sarofim and Transamerica is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sarofim Equity and Transamerica Cleartrack Retire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Cleartrack and Sarofim Equity 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 Sarofim Equity are associated (or correlated) with Transamerica Cleartrack. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Cleartrack has no effect on the direction of Sarofim Equity i.e., Sarofim Equity and Transamerica Cleartrack go up and down completely randomly.

Pair Corralation between Sarofim Equity and Transamerica Cleartrack

Assuming the 90 days horizon Sarofim Equity is expected to under-perform the Transamerica Cleartrack. In addition to that, Sarofim Equity is 4.98 times more volatile than Transamerica Cleartrack Retirement. It trades about -0.12 of its total potential returns per unit of risk. Transamerica Cleartrack Retirement is currently generating about -0.05 per unit of volatility. If you would invest  827.00  in Transamerica Cleartrack Retirement on October 8, 2024 and sell it today you would lose (10.00) from holding Transamerica Cleartrack Retirement or give up 1.21% of portfolio value over 90 days.

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

Sarofim Equity  vs.  Transamerica Cleartrack Retire

Sarofim Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarofim Equity 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 primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Transamerica Cleartrack

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sarofim Equity and Transamerica Cleartrack

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

The idea behind Sarofim Equity and Transamerica Cleartrack Retirement 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.