Correlation Between Transamerica Large and Guidemark Large

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

Diversification Opportunities for Transamerica Large and Guidemark Large

0.22

Correlation Coefficient

Transamerica Large  Guidemark Large

Modest diversification

The 3 months correlation between TRANSAMERICA and Guidemark is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Large Cap and Guidemark Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark Large Cap 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 Guidemark Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark Large Cap has no effect on the direction of Transamerica Large i.e., Transamerica Large and Guidemark Large go up and down completely randomly.

Pair Corralation between Transamerica Large and Guidemark Large

Assuming the 90 days horizon Transamerica Large is expected to generate 2.34 times less return on investment than Guidemark Large. But when comparing it to its historical volatility, Transamerica Large Cap is 1.2 times less risky than Guidemark Large. It trades about 0.03 of its potential returns per unit of risk. Guidemark Large Cap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,124  in Guidemark Large Cap on December 27, 2024 and sell it today you would earn a total of  31.00  from holding Guidemark Large Cap or generate 2.76% 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.  Guidemark Large Cap

Transamerica Large Cap

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Large Cap are ranked lower than 2 (%) 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.

Guidemark Large Cap

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guidemark Large Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Guidemark Large 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 Guidemark Large

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

The idea behind Transamerica Large Cap and Guidemark Large Cap 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.

Check out your portfolio center.

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.