Correlation Between Transamerica Large and Ab Value

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

By analyzing existing cross correlation between Transamerica Large Value and Ab Value Fund, you can compare the effects of market volatilities on Transamerica Large and Ab Value 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 Large with a short position of Ab Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Large and Ab Value.

Diversification Opportunities for Transamerica Large and Ab Value

0.91

Correlation Coefficient

Transamerica Large  Ab Value

Almost no diversification

The 3 months correlation between Transamerica and ABVCX is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Large Value and Ab Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Value Fund and Transamerica Large 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 Large Value are associated (or correlated) with Ab Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Value Fund has no effect on the direction of Transamerica Large i.e., Transamerica Large and Ab Value go up and down completely randomly.

Pair Corralation between Transamerica Large and Ab Value

Assuming the 90 days horizon Transamerica Large Value is expected to generate 0.77 times more return on investment than Ab Value. However, Transamerica Large Value is 1.3 times less risky than Ab Value. It trades about 0.08 of its potential returns per unit of risk. Ab Value Fund is currently generating about 0.05 per unit of risk. If you would invest  892.00  in Transamerica Large Value on September 14, 2024 and sell it today you would earn a total of  283.00  from holding Transamerica Large Value or generate 31.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Transamerica Large Value  vs.  Ab Value Fund

Transamerica Large Value

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Large Value are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transamerica Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Value Fund

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Value Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Ab Value 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 Large and Ab Value

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

The idea behind Transamerica Large Value and Ab Value Fund 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.