Correlation Between Transamerica Capital and Cutler Equity

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

Diversification Opportunities for Transamerica Capital and Cutler Equity

-0.16

Correlation Coefficient

Transamerica Capital  Cutler Equity

Good diversification

The 3 months correlation between Transamerica and Cutler is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Capital Growth and Cutler Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cutler Equity 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 Cutler Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cutler Equity has no effect on the direction of Transamerica Capital i.e., Transamerica Capital and Cutler Equity go up and down completely randomly.

Pair Corralation between Transamerica Capital and Cutler Equity

Assuming the 90 days horizon Transamerica Capital Growth is expected to generate 2.32 times more return on investment than Cutler Equity. However, Transamerica Capital is 2.32 times more volatile than Cutler Equity. It trades about 0.13 of its potential returns per unit of risk. Cutler Equity is currently generating about 0.03 per unit of risk. If you would invest  2,570  in Transamerica Capital Growth on October 9, 2024 and sell it today you would earn a total of  1,199  from holding Transamerica Capital Growth or generate 46.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.46%
Values	Daily Returns

Transamerica Capital Growth  vs.  Cutler Equity

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.

Cutler Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cutler Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Transamerica Capital and Cutler Equity

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

The idea behind Transamerica Capital Growth and Cutler Equity 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.