Correlation Between Transamerica Large and Intermediate-term

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

Diversification Opportunities for Transamerica Large and Intermediate-term

0.58

Correlation Coefficient

Transamerica Large  Intermediate-term

Very weak diversification

The 3 months correlation between Transamerica and Intermediate-term is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Large Cap and Intermediate Term Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Term Bond 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 Intermediate-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Term Bond has no effect on the direction of Transamerica Large i.e., Transamerica Large and Intermediate-term go up and down completely randomly.

Pair Corralation between Transamerica Large and Intermediate-term

Assuming the 90 days horizon Transamerica Large Cap is expected to under-perform the Intermediate-term. In addition to that, Transamerica Large is 2.28 times more volatile than Intermediate Term Bond Fund. It trades about -0.24 of its total potential returns per unit of risk. Intermediate Term Bond Fund is currently generating about -0.05 per unit of volatility. If you would invest  910.00  in Intermediate Term Bond Fund on October 7, 2024 and sell it today you would lose (6.00) from holding Intermediate Term Bond Fund or give up 0.66% of portfolio value over 90 days.

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

Transamerica Large Cap  vs.  Intermediate Term Bond Fund

Transamerica Large Cap

Risk-Adjusted Performance

0 of 100

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.

Intermediate Term Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intermediate Term Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Intermediate-term 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 Intermediate-term

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

The idea behind Transamerica Large Cap and Intermediate Term Bond Fund 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.