Correlation Between Transamerica Asset and Balanced Allocation

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

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

Diversification Opportunities for Transamerica Asset and Balanced Allocation

0.58

Correlation Coefficient

Transamerica Asset  Balanced Allocation

Very weak diversification

The 3 months correlation between Transamerica and Balanced is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Asset Allocation and Balanced Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Allocation and Transamerica Asset 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 Asset Allocation are associated (or correlated) with Balanced Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Allocation has no effect on the direction of Transamerica Asset i.e., Transamerica Asset and Balanced Allocation go up and down completely randomly.

Pair Corralation between Transamerica Asset and Balanced Allocation

Assuming the 90 days horizon Transamerica Asset Allocation is expected to under-perform the Balanced Allocation. In addition to that, Transamerica Asset is 2.64 times more volatile than Balanced Allocation Fund. It trades about -0.07 of its total potential returns per unit of risk. Balanced Allocation Fund is currently generating about 0.05 per unit of volatility. If you would invest  1,156  in Balanced Allocation Fund on December 23, 2024 and sell it today you would earn a total of  15.00  from holding Balanced Allocation Fund or generate 1.3% return on investment over 90 days.

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

Transamerica Asset Allocation   vs.  Balanced Allocation Fund

Transamerica Asset

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica Asset Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Transamerica Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Balanced Allocation

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Allocation Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Balanced Allocation 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 Asset and Balanced Allocation

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

The idea behind Transamerica Asset Allocation and Balanced Allocation 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 CEOs Directory module to screen CEOs from public companies around the world.