Correlation Between Fundamental Large and Transamerica Large

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

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

Diversification Opportunities for Fundamental Large and Transamerica Large

0.49

Correlation Coefficient

Fundamental Large  Transamerica Large

Very weak diversification

The 3 months correlation between Fundamental and Transamerica is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and Transamerica Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Cap and Fundamental Large 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 Fundamental Large Cap are associated (or correlated) with Transamerica Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Large Cap has no effect on the direction of Fundamental Large i.e., Fundamental Large and Transamerica Large go up and down completely randomly.

Pair Corralation between Fundamental Large and Transamerica Large

Assuming the 90 days horizon Fundamental Large Cap is expected to under-perform the Transamerica Large. In addition to that, Fundamental Large is 2.22 times more volatile than Transamerica Large Cap. It trades about -0.15 of its total potential returns per unit of risk. Transamerica Large Cap is currently generating about -0.1 per unit of volatility. If you would invest  1,564  in Transamerica Large Cap on November 28, 2024 and sell it today you would lose (66.00) from holding Transamerica Large Cap or give up 4.22% of portfolio value over 90 days.

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

Fundamental Large Cap  vs.  Transamerica Large Cap

Fundamental Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fundamental Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Transamerica Large Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Fundamental Large and Transamerica Large

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

The idea behind Fundamental Large Cap and Transamerica Large 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.