Correlation Between Transamerica Financial and Multi Manager

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

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

Diversification Opportunities for Transamerica Financial and Multi Manager

0.83

Correlation Coefficient

Transamerica Financial  Multi Manager

Very poor diversification

The 3 months correlation between Transamerica and Multi is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Multi Manager Directional Alte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager Direct and Transamerica Financial 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 Financial Life are associated (or correlated) with Multi Manager. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager Direct has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Multi Manager go up and down completely randomly.

Pair Corralation between Transamerica Financial and Multi Manager

Assuming the 90 days horizon Transamerica Financial Life is expected to generate 0.31 times more return on investment than Multi Manager. However, Transamerica Financial Life is 3.19 times less risky than Multi Manager. It trades about -0.42 of its potential returns per unit of risk. Multi Manager Directional Alternative is currently generating about -0.21 per unit of risk. If you would invest  1,243  in Transamerica Financial Life on September 26, 2024 and sell it today you would lose (77.00) from holding Transamerica Financial Life or give up 6.19% of portfolio value over 90 days.

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

Transamerica Financial Life  vs.  Multi Manager Directional Alte

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.

Multi Manager Direct

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Multi Manager Directional Alternative has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Multi Manager 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 Financial and Multi Manager

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

The idea behind Transamerica Financial Life and Multi Manager Directional Alternative 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.