Correlation Between Transamerica Intermediate and Sterling Capital

Can any of the company-specific risk be diversified away by investing in both Transamerica Intermediate and Sterling Capital 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 Sterling Capital 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 Sterling Capital Short, you can compare the effects of market volatilities on Transamerica Intermediate and Sterling Capital 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 Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Intermediate and Sterling Capital.

Diversification Opportunities for Transamerica Intermediate and Sterling Capital

0.69

Correlation Coefficient

Transamerica Intermediate  Sterling Capital

Poor diversification

The 3 months correlation between Transamerica and Sterling is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Intermediate Muni and Sterling Capital Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Short 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 Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Short has no effect on the direction of Transamerica Intermediate i.e., Transamerica Intermediate and Sterling Capital go up and down completely randomly.

Pair Corralation between Transamerica Intermediate and Sterling Capital

Assuming the 90 days horizon Transamerica Intermediate is expected to generate 2.3 times less return on investment than Sterling Capital. In addition to that, Transamerica Intermediate is 2.01 times more volatile than Sterling Capital Short. It trades about 0.05 of its total potential returns per unit of risk. Sterling Capital Short is currently generating about 0.21 per unit of volatility. If you would invest  826.00  in Sterling Capital Short on December 25, 2024 and sell it today you would earn a total of  11.00  from holding Sterling Capital Short or generate 1.33% return on investment over 90 days.

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

Transamerica Intermediate Muni  vs.  Sterling Capital Short

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 3 (%) 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.

Sterling Capital Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Short are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Sterling Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Transamerica Intermediate and Sterling Capital

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

The idea behind Transamerica Intermediate Muni and Sterling Capital Short 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.