Correlation Between Transamerica High and Ab Growth

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

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

Diversification Opportunities for Transamerica High and Ab Growth

0.04

Correlation Coefficient

Transamerica High  Ab Growth

Significant diversification

The 3 months correlation between Transamerica and AGRFX is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica High Yield and Ab Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Growth Fund and Transamerica High 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 High Yield are associated (or correlated) with Ab Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Growth Fund has no effect on the direction of Transamerica High i.e., Transamerica High and Ab Growth go up and down completely randomly.

Pair Corralation between Transamerica High and Ab Growth

Assuming the 90 days horizon Transamerica High Yield is expected to generate 0.16 times more return on investment than Ab Growth. However, Transamerica High Yield is 6.23 times less risky than Ab Growth. It trades about 0.09 of its potential returns per unit of risk. Ab Growth Fund is currently generating about -0.1 per unit of risk. If you would invest  804.00  in Transamerica High Yield on December 23, 2024 and sell it today you would earn a total of  9.00  from holding Transamerica High Yield or generate 1.12% return on investment over 90 days.

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

Transamerica High Yield  vs.  Ab Growth Fund

Transamerica High Yield

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica High Yield are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Transamerica High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Growth Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ab Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental 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 High and Ab Growth

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

The idea behind Transamerica High Yield and Ab Growth 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.