Correlation Between Transamerica International and Transamerica Large

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

Diversification Opportunities for Transamerica International and Transamerica Large

0.98

Correlation Coefficient

Transamerica International  Transamerica Large

Almost no diversification

The 3 months correlation between Transamerica and Transamerica is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica International Gro 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 International 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 International 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 International i.e., Transamerica International and Transamerica Large go up and down completely randomly.

Pair Corralation between Transamerica International and Transamerica Large

Assuming the 90 days horizon Transamerica International Growth is expected to generate 0.9 times more return on investment than Transamerica Large. However, Transamerica International Growth is 1.11 times less risky than Transamerica Large. It trades about -0.13 of its potential returns per unit of risk. Transamerica Large Value is currently generating about -0.14 per unit of risk. If you would invest  798.00  in Transamerica International Growth on December 2, 2024 and sell it today you would lose (133.00) from holding Transamerica International Growth or give up 16.67% of portfolio value over 90 days.

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

Transamerica International Gro  vs.  Transamerica Large Value

Transamerica International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica International Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Transamerica Large Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica Large Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Transamerica International and Transamerica Large

The main advantage of trading using opposite Transamerica International and Transamerica Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica International 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 International 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.