Correlation Between Transamerica Capital and Baird Midcap

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

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

Diversification Opportunities for Transamerica Capital and Baird Midcap

0.59

Correlation Coefficient

Transamerica Capital  Baird Midcap

Very weak diversification

The 3 months correlation between Transamerica and Baird is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Capital Growth and Baird Midcap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Midcap and Transamerica Capital 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 Transamerica Capital Growth are associated (or correlated) with Baird Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Midcap has no effect on the direction of Transamerica Capital i.e., Transamerica Capital and Baird Midcap go up and down completely randomly.

Pair Corralation between Transamerica Capital and Baird Midcap

Assuming the 90 days horizon Transamerica Capital Growth is expected to generate 1.97 times more return on investment than Baird Midcap. However, Transamerica Capital is 1.97 times more volatile than Baird Midcap Fund. It trades about 0.23 of its potential returns per unit of risk. Baird Midcap Fund is currently generating about -0.01 per unit of risk. If you would invest  2,945  in Transamerica Capital Growth on October 9, 2024 and sell it today you would earn a total of  824.00  from holding Transamerica Capital Growth or generate 27.98% return on investment over 90 days.

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

Transamerica Capital Growth  vs.  Baird Midcap Fund

Transamerica Capital

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Capital Growth are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Transamerica Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Baird Midcap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Transamerica Capital and Baird Midcap

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

The idea behind Transamerica Capital Growth and Baird Midcap Fund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.