Correlation Between Transamerica Capital and Longleaf Partners

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

Diversification Opportunities for Transamerica Capital and Longleaf Partners

-0.21

Correlation Coefficient

Transamerica Capital  Longleaf Partners

Very good diversification

The 3 months correlation between Transamerica and Longleaf is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Capital Growth and Longleaf Partners Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners 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 Longleaf Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longleaf Partners has no effect on the direction of Transamerica Capital i.e., Transamerica Capital and Longleaf Partners go up and down completely randomly.

Pair Corralation between Transamerica Capital and Longleaf Partners

Assuming the 90 days horizon Transamerica Capital Growth is expected to generate 1.93 times more return on investment than Longleaf Partners. However, Transamerica Capital is 1.93 times more volatile than Longleaf Partners Fund. It trades about 0.09 of its potential returns per unit of risk. Longleaf Partners Fund is currently generating about 0.04 per unit of risk. If you would invest  1,980  in Transamerica Capital Growth on October 11, 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 Against
Strength	Insignificant
Accuracy	95.76%
Values	Daily Returns

Transamerica Capital Growth  vs.  Longleaf Partners Fund

Transamerica Capital

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Capital Growth are ranked lower than 16 (%) 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.

Longleaf Partners

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Transamerica Capital Growth and Longleaf Partners 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 Commodity Directory module to find actively traded commodities issued by global exchanges.