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 Small and Transamerica Large Core, 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

-0.64

Correlation Coefficient

Transamerica International  Transamerica Large

Excellent diversification

The 3 months correlation between Transamerica and Transamerica is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica International Sma and Transamerica Large Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Core 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 Small 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 Core 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 Small is expected to under-perform the Transamerica Large. In addition to that, Transamerica International is 1.23 times more volatile than Transamerica Large Core. It trades about -0.05 of its total potential returns per unit of risk. Transamerica Large Core is currently generating about 0.22 per unit of volatility. If you would invest  1,283  in Transamerica Large Core on September 4, 2024 and sell it today you would earn a total of  131.00  from holding Transamerica Large Core or generate 10.21% return on investment over 90 days.

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

Transamerica International Sma  vs.  Transamerica Large Core

Transamerica International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Transamerica Large Core

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Large Core are ranked lower than 17 (%) 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 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 Small and Transamerica Large Core 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.