Correlation Between Transamerica Capital and New Perspective

Can any of the company-specific risk be diversified away by investing in both Transamerica Capital and New Perspective 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 New Perspective 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 New Perspective Fund, you can compare the effects of market volatilities on Transamerica Capital and New Perspective 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 New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Capital and New Perspective.

Diversification Opportunities for Transamerica Capital and New Perspective

0.02

Correlation Coefficient

Transamerica Capital  New Perspective

Significant diversification

The 3 months correlation between Transamerica and New is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Capital Growth and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective 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 New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Transamerica Capital i.e., Transamerica Capital and New Perspective go up and down completely randomly.

Pair Corralation between Transamerica Capital and New Perspective

Assuming the 90 days horizon Transamerica Capital Growth is expected to generate 2.08 times more return on investment than New Perspective. However, Transamerica Capital is 2.08 times more volatile than New Perspective Fund. It trades about 0.09 of its potential returns per unit of risk. New Perspective Fund is currently generating about 0.06 per unit of risk. If you would invest  1,980  in Transamerica Capital Growth on October 10, 2024 and sell it today you would earn a total of  1,789  from holding Transamerica Capital Growth or generate 90.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.56%
Values	Daily Returns

Transamerica Capital Growth  vs.  New Perspective 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.

New Perspective

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Perspective Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, New Perspective 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 New Perspective

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

The idea behind Transamerica Capital Growth and New Perspective 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.