Correlation Between Transamerica Capital and Transamerica Large

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

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

Diversification Opportunities for Transamerica Capital and Transamerica Large

0.93

Correlation Coefficient

Transamerica Capital  Transamerica Large

Almost no diversification

The 3 months correlation between Transamerica and Transamerica is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Capital Growth and Transamerica Large Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Value and Transamerica Capital 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 Capital Growth are associated (or correlated) with Transamerica Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Large Value has no effect on the direction of Transamerica Capital i.e., Transamerica Capital and Transamerica Large go up and down completely randomly.

Pair Corralation between Transamerica Capital and Transamerica Large

Assuming the 90 days horizon Transamerica Capital Growth is expected to generate 2.76 times more return on investment than Transamerica Large. However, Transamerica Capital is 2.76 times more volatile than Transamerica Large Value. It trades about 0.35 of its potential returns per unit of risk. Transamerica Large Value is currently generating about 0.21 per unit of risk. If you would invest  2,983  in Transamerica Capital Growth on September 12, 2024 and sell it today you would earn a total of  1,242  from holding Transamerica Capital Growth or generate 41.64% return on investment over 90 days.

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

Transamerica Capital Growth  vs.  Transamerica Large Value

Transamerica Capital

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Capital Growth are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Transamerica Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Transamerica Large Value

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Large Value are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Transamerica Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Transamerica Capital and Transamerica Large

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

The idea behind Transamerica Capital Growth and Transamerica Large Value 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.