Correlation Between Transamerica Large and Fundamental Large

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

Diversification Opportunities for Transamerica Large and Fundamental Large

0.95

Correlation Coefficient

Transamerica Large  Fundamental Large

Almost no diversification

The 3 months correlation between Transamerica and FUNDAMENTAL is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Large Cap and Fundamental Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental 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 Fundamental Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Large Cap has no effect on the direction of Transamerica Large i.e., Transamerica Large and Fundamental Large go up and down completely randomly.

Pair Corralation between Transamerica Large and Fundamental Large

Assuming the 90 days horizon Transamerica Large is expected to generate 1.19 times less return on investment than Fundamental Large. But when comparing it to its historical volatility, Transamerica Large Cap is 1.12 times less risky than Fundamental Large. It trades about 0.17 of its potential returns per unit of risk. Fundamental Large Cap is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,577  in Fundamental Large Cap on August 31, 2024 and sell it today you would earn a total of  634.00  from holding Fundamental Large Cap or generate 8.37% return on investment over 90 days.

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

Transamerica Large Cap  vs.  Fundamental Large Cap

Transamerica Large Cap

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Large Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Transamerica Large may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Fundamental Large Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Large Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly inconsistent basic indicators, Fundamental Large may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Transamerica Large and Fundamental Large

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

The idea behind Transamerica Large Cap and Fundamental 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.