Correlation Between Transamerica Short and Federated Short-intermedia

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

By analyzing existing cross correlation between Transamerica Short Term Bond and Federated Short Intermediate Duration, you can compare the effects of market volatilities on Transamerica Short and Federated Short-intermedia 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 Short with a short position of Federated Short-intermedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Short and Federated Short-intermedia.

Diversification Opportunities for Transamerica Short and Federated Short-intermedia

0.55

Correlation Coefficient

Transamerica Short  Federated Short-intermedia

Very weak diversification

The 3 months correlation between Transamerica and Federated is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Short Term Bond and Federated Short Intermediate D in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Short-intermedia and Transamerica Short 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 Short Term Bond are associated (or correlated) with Federated Short-intermedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Short-intermedia has no effect on the direction of Transamerica Short i.e., Transamerica Short and Federated Short-intermedia go up and down completely randomly.

Pair Corralation between Transamerica Short and Federated Short-intermedia

Assuming the 90 days horizon Transamerica Short Term Bond is expected to generate 0.88 times more return on investment than Federated Short-intermedia. However, Transamerica Short Term Bond is 1.13 times less risky than Federated Short-intermedia. It trades about 0.11 of its potential returns per unit of risk. Federated Short Intermediate Duration is currently generating about 0.06 per unit of risk. If you would invest  972.00  in Transamerica Short Term Bond on October 24, 2024 and sell it today you would earn a total of  8.00  from holding Transamerica Short Term Bond or generate 0.82% return on investment over 90 days.

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

Transamerica Short Term Bond  vs.  Federated Short Intermediate D

Transamerica Short Term

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Short Term Bond are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transamerica Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Short-intermedia

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Short Intermediate Duration are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Federated Short-intermedia 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 Short and Federated Short-intermedia

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

The idea behind Transamerica Short Term Bond and Federated Short Intermediate Duration 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.