Correlation Between William Blair and Transamerica Mid

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

By analyzing existing cross correlation between William Blair Small and Transamerica Mid Cap, you can compare the effects of market volatilities on William Blair and Transamerica Mid 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 William Blair with a short position of Transamerica Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of William Blair and Transamerica Mid.

Diversification Opportunities for William Blair and Transamerica Mid

0.8

Correlation Coefficient

William Blair  Transamerica Mid

Very poor diversification

The 3 months correlation between William and Transamerica is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding William Blair Small and Transamerica Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Mid Cap and William Blair 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 William Blair Small are associated (or correlated) with Transamerica Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Mid Cap has no effect on the direction of William Blair i.e., William Blair and Transamerica Mid go up and down completely randomly.

Pair Corralation between William Blair and Transamerica Mid

Assuming the 90 days horizon William Blair Small is expected to under-perform the Transamerica Mid. But the mutual fund apears to be less risky and, when comparing its historical volatility, William Blair Small is 1.15 times less risky than Transamerica Mid. The mutual fund trades about -0.39 of its potential returns per unit of risk. The Transamerica Mid Cap is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  1,102  in Transamerica Mid Cap on October 9, 2024 and sell it today you would lose (85.00) from holding Transamerica Mid Cap or give up 7.71% of portfolio value over 90 days.

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

William Blair Small  vs.  Transamerica Mid Cap

William Blair Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days William Blair Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, William Blair is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica Mid Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Mid Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Transamerica Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with William Blair and Transamerica Mid

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

The idea behind William Blair Small and Transamerica Mid 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.