Correlation Between Transamerica Financial and Laudus International

Can any of the company-specific risk be diversified away by investing in both Transamerica Financial and Laudus International 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 Laudus International 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 Laudus International Marketmasters, you can compare the effects of market volatilities on Transamerica Financial and Laudus International 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 Laudus International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Financial and Laudus International.

Diversification Opportunities for Transamerica Financial and Laudus International

-0.39

Correlation Coefficient

Transamerica Financial  Laudus International

Very good diversification

The 3 months correlation between Transamerica and Laudus is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Laudus International Marketmas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laudus International 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 Laudus International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laudus International has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Laudus International go up and down completely randomly.

Pair Corralation between Transamerica Financial and Laudus International

Assuming the 90 days horizon Transamerica Financial Life is expected to generate 0.81 times more return on investment than Laudus International. However, Transamerica Financial Life is 1.23 times less risky than Laudus International. It trades about 0.13 of its potential returns per unit of risk. Laudus International Marketmasters is currently generating about -0.01 per unit of risk. If you would invest  1,170  in Transamerica Financial Life on September 5, 2024 and sell it today you would earn a total of  67.00  from holding Transamerica Financial Life or generate 5.73% return on investment over 90 days.

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

Transamerica Financial Life  vs.  Laudus International Marketmas

Transamerica Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Financial Life are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. 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.

Laudus International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laudus International Marketmasters has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Laudus International 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 Laudus International

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

The idea behind Transamerica Financial Life and Laudus International Marketmasters 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.