Correlation Between Transamerica Asset and Prudential Qma

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

Diversification Opportunities for Transamerica Asset and Prudential Qma

0.65

Correlation Coefficient

Transamerica Asset  Prudential Qma

Poor diversification

The 3 months correlation between Transamerica and Prudential is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Asset Allocation and Prudential Qma Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Qma Mid 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 Prudential Qma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Qma Mid has no effect on the direction of Transamerica Asset i.e., Transamerica Asset and Prudential Qma go up and down completely randomly.

Pair Corralation between Transamerica Asset and Prudential Qma

Assuming the 90 days horizon Transamerica Asset Allocation is expected to generate 0.76 times more return on investment than Prudential Qma. However, Transamerica Asset Allocation is 1.32 times less risky than Prudential Qma. It trades about 0.07 of its potential returns per unit of risk. Prudential Qma Mid Cap is currently generating about 0.04 per unit of risk. If you would invest  1,153  in Transamerica Asset Allocation on October 10, 2024 and sell it today you would earn a total of  347.00  from holding Transamerica Asset Allocation or generate 30.1% return on investment over 90 days.

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

Transamerica Asset Allocation   vs.  Prudential Qma Mid Cap

Transamerica Asset

Risk-Adjusted Performance

0 of 100

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.

Prudential Qma Mid

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Qma Mid Cap are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Prudential Qma 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 Prudential Qma

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

The idea behind Transamerica Asset Allocation and Prudential Qma Mid Cap 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.