Correlation Between Transamerica Emerging and Pear Tree

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

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

Diversification Opportunities for Transamerica Emerging and Pear Tree

0.76

Correlation Coefficient

Transamerica Emerging  Pear Tree

Poor diversification

The 3 months correlation between Transamerica and Pear is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Emerging Markets and Pear Tree Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Polaris and Transamerica Emerging 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 Emerging Markets are associated (or correlated) with Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Polaris has no effect on the direction of Transamerica Emerging i.e., Transamerica Emerging and Pear Tree go up and down completely randomly.

Pair Corralation between Transamerica Emerging and Pear Tree

Assuming the 90 days horizon Transamerica Emerging is expected to generate 1.01 times less return on investment than Pear Tree. In addition to that, Transamerica Emerging is 1.14 times more volatile than Pear Tree Polaris. It trades about 0.11 of its total potential returns per unit of risk. Pear Tree Polaris is currently generating about 0.13 per unit of volatility. If you would invest  1,483  in Pear Tree Polaris on December 30, 2024 and sell it today you would earn a total of  105.00  from holding Pear Tree Polaris or generate 7.08% return on investment over 90 days.

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

Transamerica Emerging Markets  vs.  Pear Tree Polaris

Transamerica Emerging

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Emerging Markets are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking indicators, Transamerica Emerging may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pear Tree Polaris

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pear Tree Polaris are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Pear Tree may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Transamerica Emerging and Pear Tree

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

The idea behind Transamerica Emerging Markets and Pear Tree Polaris 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.