Correlation Between Transamerica Capital and Icon Financial

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

Diversification Opportunities for Transamerica Capital and Icon Financial

-0.62

Correlation Coefficient

Transamerica Capital  Icon Financial

Excellent diversification

The 3 months correlation between Transamerica and Icon is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Capital Growth and Icon Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Financial 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 Icon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Financial has no effect on the direction of Transamerica Capital i.e., Transamerica Capital and Icon Financial go up and down completely randomly.

Pair Corralation between Transamerica Capital and Icon Financial

Assuming the 90 days horizon Transamerica Capital Growth is expected to generate 0.89 times more return on investment than Icon Financial. However, Transamerica Capital Growth is 1.12 times less risky than Icon Financial. It trades about 0.22 of its potential returns per unit of risk. Icon Financial Fund is currently generating about -0.07 per unit of risk. If you would invest  3,043  in Transamerica Capital Growth on October 24, 2024 and sell it today you would earn a total of  816.00  from holding Transamerica Capital Growth or generate 26.82% return on investment over 90 days.

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

Transamerica Capital Growth  vs.  Icon Financial 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.

Icon Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Icon Financial Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Icon Financial

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

The idea behind Transamerica Capital Growth and Icon Financial 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.