Correlation Between Catholic Values and Transamerica Financial

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

By analyzing existing cross correlation between Catholic Values Fixed and Transamerica Financial Life, you can compare the effects of market volatilities on Catholic Values and Transamerica Financial 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 Catholic Values with a short position of Transamerica Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catholic Values and Transamerica Financial.

Diversification Opportunities for Catholic Values and Transamerica Financial

-0.28

Correlation Coefficient

Catholic Values  Transamerica Financial

Very good diversification

The 3 months correlation between Catholic and Transamerica is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Catholic Values Fixed and Transamerica Financial Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Financial and Catholic Values 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 Catholic Values Fixed are associated (or correlated) with Transamerica Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Financial has no effect on the direction of Catholic Values i.e., Catholic Values and Transamerica Financial go up and down completely randomly.

Pair Corralation between Catholic Values and Transamerica Financial

Assuming the 90 days horizon Catholic Values Fixed is expected to under-perform the Transamerica Financial. But the mutual fund apears to be less risky and, when comparing its historical volatility, Catholic Values Fixed is 2.25 times less risky than Transamerica Financial. The mutual fund trades about -0.19 of its potential returns per unit of risk. The Transamerica Financial Life is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,179  in Transamerica Financial Life on September 20, 2024 and sell it today you would lose (23.00) from holding Transamerica Financial Life or give up 1.95% of portfolio value over 90 days.

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

Catholic Values Fixed  vs.  Transamerica Financial Life

Catholic Values Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Transamerica Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Catholic Values and Transamerica Financial

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

The idea behind Catholic Values Fixed and Transamerica Financial Life 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.