Correlation Between Transamerica Large and Nuveen Minnesota

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

By analyzing existing cross correlation between Transamerica Large Cap and Nuveen Minnesota Intermediate, you can compare the effects of market volatilities on Transamerica Large and Nuveen Minnesota 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 Nuveen Minnesota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Large and Nuveen Minnesota.

Diversification Opportunities for Transamerica Large and Nuveen Minnesota

0.21

Correlation Coefficient

Transamerica Large  Nuveen Minnesota

Modest diversification

The 3 months correlation between TRANSAMERICA and Nuveen is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Large Cap and Nuveen Minnesota Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Minnesota Int 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 Cap are associated (or correlated) with Nuveen Minnesota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Minnesota Int has no effect on the direction of Transamerica Large i.e., Transamerica Large and Nuveen Minnesota go up and down completely randomly.

Pair Corralation between Transamerica Large and Nuveen Minnesota

Assuming the 90 days horizon Transamerica Large Cap is expected to generate 4.7 times more return on investment than Nuveen Minnesota. However, Transamerica Large is 4.7 times more volatile than Nuveen Minnesota Intermediate. It trades about 0.01 of its potential returns per unit of risk. Nuveen Minnesota Intermediate is currently generating about -0.01 per unit of risk. If you would invest  1,446  in Transamerica Large Cap on December 30, 2024 and sell it today you would earn a total of  4.00  from holding Transamerica Large Cap or generate 0.28% return on investment over 90 days.

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

Transamerica Large Cap  vs.  Nuveen Minnesota Intermediate

Transamerica Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica Large Cap has generated negative risk-adjusted returns adding no value to fund investors. 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.

Nuveen Minnesota Int

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Minnesota Intermediate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Nuveen Minnesota 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 Nuveen Minnesota

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

The idea behind Transamerica Large Cap and Nuveen Minnesota Intermediate 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.