Correlation Between Transamerica Growth and Transamerica Asset

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

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

Diversification Opportunities for Transamerica Growth and Transamerica Asset

0.45

Correlation Coefficient

Transamerica Growth  Transamerica Asset

Very weak diversification

The 3 months correlation between Transamerica and Transamerica is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Growth T and Transamerica Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Asset and Transamerica Growth 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 Growth T are associated (or correlated) with Transamerica Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Asset has no effect on the direction of Transamerica Growth i.e., Transamerica Growth and Transamerica Asset go up and down completely randomly.

Pair Corralation between Transamerica Growth and Transamerica Asset

Assuming the 90 days horizon Transamerica Growth T is expected to generate 2.59 times more return on investment than Transamerica Asset. However, Transamerica Growth is 2.59 times more volatile than Transamerica Asset Allocation. It trades about 0.11 of its potential returns per unit of risk. Transamerica Asset Allocation is currently generating about 0.08 per unit of risk. If you would invest  7,543  in Transamerica Growth T on October 5, 2024 and sell it today you would earn a total of  4,811  from holding Transamerica Growth T or generate 63.78% return on investment over 90 days.

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

Transamerica Growth T  vs.  Transamerica Asset Allocation

Transamerica Growth

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Growth T 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 Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica Asset Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Transamerica Asset 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 Growth and Transamerica Asset

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

The idea behind Transamerica Growth T and Transamerica Asset Allocation 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.