Correlation Between Transamerica High and Wasatch Core

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

Diversification Opportunities for Transamerica High and Wasatch Core

0.09

Correlation Coefficient

Transamerica High  Wasatch Core

Significant diversification

The 3 months correlation between Transamerica and Wasatch is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica High Yield and Wasatch E Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch E Growth 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 Wasatch Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch E Growth has no effect on the direction of Transamerica High i.e., Transamerica High and Wasatch Core go up and down completely randomly.

Pair Corralation between Transamerica High and Wasatch Core

Assuming the 90 days horizon Transamerica High Yield is expected to generate 0.18 times more return on investment than Wasatch Core. However, Transamerica High Yield is 5.65 times less risky than Wasatch Core. It trades about 0.1 of its potential returns per unit of risk. Wasatch E Growth is currently generating about -0.1 per unit of risk. If you would invest  804.00  in Transamerica High Yield on December 25, 2024 and sell it today you would earn a total of  10.00  from holding Transamerica High Yield or generate 1.24% 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.  Wasatch E Growth

Transamerica High Yield

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica High Yield are ranked lower than 7 (%) 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.

Wasatch E Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wasatch E Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Wasatch Core

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

The idea behind Transamerica High Yield and Wasatch E Growth 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.