Correlation Between Eic Value and Transamerica Financial

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

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

Diversification Opportunities for Eic Value and Transamerica Financial

0.85

Correlation Coefficient

Eic Value  Transamerica Financial

Very poor diversification

The 3 months correlation between Eic and Transamerica is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Eic Value Fund and Transamerica Financial Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Financial and Eic Value 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 Eic Value Fund 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 Eic Value i.e., Eic Value and Transamerica Financial go up and down completely randomly.

Pair Corralation between Eic Value and Transamerica Financial

Assuming the 90 days horizon Eic Value Fund is expected to generate 0.94 times more return on investment than Transamerica Financial. However, Eic Value Fund is 1.06 times less risky than Transamerica Financial. It trades about -0.35 of its potential returns per unit of risk. Transamerica Financial Life is currently generating about -0.43 per unit of risk. If you would invest  1,765  in Eic Value Fund on September 25, 2024 and sell it today you would lose (85.00) from holding Eic Value Fund or give up 4.82% of portfolio value over 90 days.

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

Eic Value Fund  vs.  Transamerica Financial Life

Eic Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eic Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Eic Value 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 Eic Value and Transamerica Financial

The main advantage of trading using opposite Eic Value and Transamerica Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eic Value 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 Eic Value Fund 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.