Correlation Between Transamerica Small and Eventide Healthcare

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

Diversification Opportunities for Transamerica Small and Eventide Healthcare

0.56

Correlation Coefficient

Transamerica Small  Eventide Healthcare

Very weak diversification

The 3 months correlation between Transamerica and Eventide is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Small Cap and Eventide Healthcare Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eventide Healthcare Life 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 Eventide Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eventide Healthcare Life has no effect on the direction of Transamerica Small i.e., Transamerica Small and Eventide Healthcare go up and down completely randomly.

Pair Corralation between Transamerica Small and Eventide Healthcare

Assuming the 90 days horizon Transamerica Small Cap is expected to under-perform the Eventide Healthcare. In addition to that, Transamerica Small is 1.9 times more volatile than Eventide Healthcare Life. It trades about -0.11 of its total potential returns per unit of risk. Eventide Healthcare Life is currently generating about -0.02 per unit of volatility. If you would invest  3,439  in Eventide Healthcare Life on October 10, 2024 and sell it today you would lose (80.00) from holding Eventide Healthcare Life or give up 2.33% of portfolio value over 90 days.

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

Transamerica Small Cap  vs.  Eventide Healthcare Life

Transamerica Small Cap

Risk-Adjusted Performance

0 of 100

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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Eventide Healthcare Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eventide Healthcare Life has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Eventide Healthcare 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 Small and Eventide Healthcare

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

The idea behind Transamerica Small Cap and Eventide Healthcare Life 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.