Correlation Between Transamerica Flexible and Transamerica Multi-managed

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

By analyzing existing cross correlation between Transamerica Flexible Income and Transamerica Multi Managed Balanced, you can compare the effects of market volatilities on Transamerica Flexible and Transamerica Multi-managed 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 Flexible with a short position of Transamerica Multi-managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Flexible and Transamerica Multi-managed.

Diversification Opportunities for Transamerica Flexible and Transamerica Multi-managed

-0.55

Correlation Coefficient

Transamerica Flexible  Transamerica Multi-managed

Excellent diversification

The 3 months correlation between Transamerica and Transamerica is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Flexible Income and Transamerica Multi Managed Bal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Multi-managed and Transamerica Flexible 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 Flexible Income are associated (or correlated) with Transamerica Multi-managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Multi-managed has no effect on the direction of Transamerica Flexible i.e., Transamerica Flexible and Transamerica Multi-managed go up and down completely randomly.

Pair Corralation between Transamerica Flexible and Transamerica Multi-managed

Assuming the 90 days horizon Transamerica Flexible Income is expected to under-perform the Transamerica Multi-managed. But the mutual fund apears to be less risky and, when comparing its historical volatility, Transamerica Flexible Income is 1.51 times less risky than Transamerica Multi-managed. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Transamerica Multi Managed Balanced is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,524  in Transamerica Multi Managed Balanced on September 3, 2024 and sell it today you would earn a total of  175.00  from holding Transamerica Multi Managed Balanced or generate 4.97% return on investment over 90 days.

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

Transamerica Flexible Income  vs.  Transamerica Multi Managed Bal

Transamerica Flexible

Risk-Adjusted Performance

0 of 100

Very Weak

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

Transamerica Multi-managed

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Multi Managed Balanced are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Transamerica Multi-managed 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 Flexible and Transamerica Multi-managed

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

The idea behind Transamerica Flexible Income and Transamerica Multi Managed Balanced 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.