Correlation Between Transamerica Flexible and Transamerica Large

Can any of the company-specific risk be diversified away by investing in both Transamerica Flexible 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 Flexible 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 Flexible Income and Transamerica Large Value, you can compare the effects of market volatilities on Transamerica Flexible 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 Flexible with a short position of Transamerica Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Flexible and Transamerica Large.

Diversification Opportunities for Transamerica Flexible and Transamerica Large

-0.62

Correlation Coefficient

Transamerica Flexible  Transamerica Large

Excellent diversification

The 3 months correlation between Transamerica and Transamerica is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Flexible Income 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 Flexible 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 Flexible Income 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 Flexible i.e., Transamerica Flexible and Transamerica Large go up and down completely randomly.

Pair Corralation between Transamerica Flexible and Transamerica Large

Assuming the 90 days horizon Transamerica Flexible Income is expected to under-perform the Transamerica Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Transamerica Flexible Income is 2.03 times less risky than Transamerica Large. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Transamerica Large Value is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,105  in Transamerica Large Value on September 12, 2024 and sell it today you would earn a total of  85.00  from holding Transamerica Large Value or generate 7.69% return on investment over 90 days.

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

Transamerica Flexible Income  vs.  Transamerica Large Value

Transamerica Flexible

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica Flexible Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Transamerica Flexible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Flexible and Transamerica Large

The main advantage of trading using opposite Transamerica Flexible and Transamerica Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Flexible 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 Flexible Income 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.