Correlation Between Transamerica Funds and Blackrock Value

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

By analyzing existing cross correlation between Transamerica Funds and Blackrock Value Opps, you can compare the effects of market volatilities on Transamerica Funds and Blackrock Value 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 Funds with a short position of Blackrock Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Funds and Blackrock Value.

Diversification Opportunities for Transamerica Funds and Blackrock Value

0.64

Correlation Coefficient

Transamerica Funds  Blackrock Value

Poor diversification

The 3 months correlation between Transamerica and Blackrock is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Funds and Blackrock Value Opps in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Value Opps and Transamerica Funds 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 Funds are associated (or correlated) with Blackrock Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Value Opps has no effect on the direction of Transamerica Funds i.e., Transamerica Funds and Blackrock Value go up and down completely randomly.

Pair Corralation between Transamerica Funds and Blackrock Value

Assuming the 90 days horizon Transamerica Funds is expected to generate 13.69 times less return on investment than Blackrock Value. But when comparing it to its historical volatility, Transamerica Funds is 7.94 times less risky than Blackrock Value. It trades about 0.13 of its potential returns per unit of risk. Blackrock Value Opps is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,809  in Blackrock Value Opps on September 5, 2024 and sell it today you would earn a total of  412.00  from holding Blackrock Value Opps or generate 14.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Transamerica Funds   vs.  Blackrock Value Opps

Transamerica Funds

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Funds are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transamerica Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Value Opps

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Value Opps are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Blackrock Value showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transamerica Funds and Blackrock Value

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

The idea behind Transamerica Funds and Blackrock Value Opps 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.