Correlation Between Transamerica Intermediate and Amer Beacon

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

By analyzing existing cross correlation between Transamerica Intermediate Muni and Amer Beacon Ark, you can compare the effects of market volatilities on Transamerica Intermediate and Amer Beacon 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 Intermediate with a short position of Amer Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Intermediate and Amer Beacon.

Diversification Opportunities for Transamerica Intermediate and Amer Beacon

-0.04

Correlation Coefficient

Transamerica Intermediate  Amer Beacon

Good diversification

The 3 months correlation between Transamerica and Amer is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Intermediate Muni and Amer Beacon Ark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amer Beacon Ark and Transamerica Intermediate 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 Intermediate Muni are associated (or correlated) with Amer Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amer Beacon Ark has no effect on the direction of Transamerica Intermediate i.e., Transamerica Intermediate and Amer Beacon go up and down completely randomly.

Pair Corralation between Transamerica Intermediate and Amer Beacon

Assuming the 90 days horizon Transamerica Intermediate is expected to generate 6.68 times less return on investment than Amer Beacon. But when comparing it to its historical volatility, Transamerica Intermediate Muni is 9.68 times less risky than Amer Beacon. It trades about 0.05 of its potential returns per unit of risk. Amer Beacon Ark is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,090  in Amer Beacon Ark on December 21, 2024 and sell it today you would earn a total of  331.00  from holding Amer Beacon Ark or generate 30.37% return on investment over 90 days.

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

Transamerica Intermediate Muni  vs.  Amer Beacon Ark

Transamerica Intermediate

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Intermediate Muni are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transamerica Intermediate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amer Beacon Ark

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amer Beacon Ark has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Transamerica Intermediate and Amer Beacon

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

The idea behind Transamerica Intermediate Muni and Amer Beacon Ark 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.