Correlation Between Transamerica Emerging and West Loop

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

Diversification Opportunities for Transamerica Emerging and West Loop

0.71

Correlation Coefficient

Transamerica Emerging  West Loop

Poor diversification

The 3 months correlation between Transamerica and West is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Emerging Markets and West Loop Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Loop Realty 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 West Loop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Loop Realty has no effect on the direction of Transamerica Emerging i.e., Transamerica Emerging and West Loop go up and down completely randomly.

Pair Corralation between Transamerica Emerging and West Loop

Assuming the 90 days horizon Transamerica Emerging Markets is expected to generate 0.97 times more return on investment than West Loop. However, Transamerica Emerging Markets is 1.03 times less risky than West Loop. It trades about 0.11 of its potential returns per unit of risk. West Loop Realty is currently generating about 0.05 per unit of risk. If you would invest  793.00  in Transamerica Emerging Markets on December 30, 2024 and sell it today you would earn a total of  55.00  from holding Transamerica Emerging Markets or generate 6.94% 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.  West Loop Realty

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.

West Loop Realty

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in West Loop Realty are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, West Loop 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 Emerging and West Loop

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

The idea behind Transamerica Emerging Markets and West Loop Realty 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.