Correlation Between Transamerica Small and Transamerica

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

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

Diversification Opportunities for Transamerica Small and Transamerica

0.66

Correlation Coefficient

Transamerica Small  Transamerica

Poor diversification

The 3 months correlation between Transamerica and Transamerica is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Small Cap and Transamerica Growth T in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Growth and Transamerica Small 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 Small Cap are associated (or correlated) with Transamerica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Growth has no effect on the direction of Transamerica Small i.e., Transamerica Small and Transamerica go up and down completely randomly.

Pair Corralation between Transamerica Small and Transamerica

Assuming the 90 days horizon Transamerica Small Cap is expected to under-perform the Transamerica. In addition to that, Transamerica Small is 2.48 times more volatile than Transamerica Growth T. It trades about -0.2 of its total potential returns per unit of risk. Transamerica Growth T is currently generating about -0.13 per unit of volatility. If you would invest  13,076  in Transamerica Growth T on December 5, 2024 and sell it today you would lose (1,286) from holding Transamerica Growth T or give up 9.83% of portfolio value over 90 days.

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

Transamerica Small Cap  vs.  Transamerica Growth T

Transamerica Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Transamerica Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica Growth T has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Small and Transamerica

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

The idea behind Transamerica Small Cap and Transamerica Growth T 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.