Can any of the company-specific risk be diversified away by investing in both Transamerica Multi-managed and Transamerica Capital 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 Multi-managed and Transamerica Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Multi Managed Balanced and Transamerica Capital Growth, you can compare the effects of market volatilities on Transamerica Multi-managed and Transamerica Capital 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 Multi-managed with a short position of Transamerica Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Multi-managed and Transamerica Capital.
Diversification Opportunities for Transamerica Multi-managed and Transamerica Capital
The 3 months correlation between Transamerica and Transamerica is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Multi Managed Bal and Transamerica Capital Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Capital and Transamerica Multi-managed 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 Multi Managed Balanced are associated (or correlated) with Transamerica Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Capital has no effect on the direction of Transamerica Multi-managed i.e., Transamerica Multi-managed and Transamerica Capital go up and down completely randomly.
Pair Corralation between Transamerica Multi-managed and Transamerica Capital
Assuming the 90 days horizon Transamerica Multi Managed Balanced is expected to generate 0.27 times more return on investment than Transamerica Capital. However, Transamerica Multi Managed Balanced is 3.75 times less risky than Transamerica Capital. It trades about 0.21 of its potential returns per unit of risk. Transamerica Capital Growth is currently generating about -0.25 per unit of risk. If you would invest 3,344 in Transamerica Multi Managed Balanced on March 6, 2024 and sell it today you would earn a total of 52.00 from holding Transamerica Multi Managed Balanced or generate 1.56% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Multi Managed Balanced are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Transamerica Multi-managed is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Over the last 90 days Transamerica Capital Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.