Correlation Between Transamerica Asset and Transamerica Dividend

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

By analyzing existing cross correlation between Transamerica Asset Allocation and Transamerica Dividend Focused, you can compare the effects of market volatilities on Transamerica Asset and Transamerica Dividend 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 Asset with a short position of Transamerica Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Asset and Transamerica Dividend.

Diversification Opportunities for Transamerica Asset and Transamerica Dividend

0.73

Correlation Coefficient

Transamerica Asset  Transamerica Dividend

Poor diversification

The 3 months correlation between Transamerica and Transamerica is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Asset Allocation and Transamerica Dividend Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Dividend and Transamerica Asset 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 Asset Allocation are associated (or correlated) with Transamerica Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Dividend has no effect on the direction of Transamerica Asset i.e., Transamerica Asset and Transamerica Dividend go up and down completely randomly.

Pair Corralation between Transamerica Asset and Transamerica Dividend

Assuming the 90 days horizon Transamerica Asset Allocation is expected to generate 0.67 times more return on investment than Transamerica Dividend. However, Transamerica Asset Allocation is 1.5 times less risky than Transamerica Dividend. It trades about 0.16 of its potential returns per unit of risk. Transamerica Dividend Focused is currently generating about 0.04 per unit of risk. If you would invest  1,275  in Transamerica Asset Allocation on March 8, 2024 and sell it today you would earn a total of  20.00  from holding Transamerica Asset Allocation or generate 1.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Transamerica Asset Allocation  vs.  Transamerica Dividend Focused

Transamerica Asset

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Asset Allocation are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transamerica Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica Dividend

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Dividend Focused are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Transamerica Dividend 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 Asset and Transamerica Dividend

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

The idea behind Transamerica Asset Allocation and Transamerica Dividend Focused 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.