Correlation Between Transamerica Intermediate and Touchstone Total

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

Diversification Opportunities for Transamerica Intermediate and Touchstone Total

0.73

Correlation Coefficient

Transamerica Intermediate  Touchstone Total

Poor diversification

The 3 months correlation between Transamerica and Touchstone is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Intermediate Muni and Touchstone Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Total Return 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 Touchstone Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Total Return has no effect on the direction of Transamerica Intermediate i.e., Transamerica Intermediate and Touchstone Total go up and down completely randomly.

Pair Corralation between Transamerica Intermediate and Touchstone Total

Assuming the 90 days horizon Transamerica Intermediate is expected to generate 4.11 times less return on investment than Touchstone Total. But when comparing it to its historical volatility, Transamerica Intermediate Muni is 1.44 times less risky than Touchstone Total. It trades about 0.05 of its potential returns per unit of risk. Touchstone Total Return is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  883.00  in Touchstone Total Return on December 25, 2024 and sell it today you would earn a total of  21.00  from holding Touchstone Total Return or generate 2.38% 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.  Touchstone Total Return

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.

Touchstone Total Return

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Total Return are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Touchstone Total 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 Touchstone Total

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

The idea behind Transamerica Intermediate Muni and Touchstone Total Return 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.