Correlation Between Federated Max and Transamerica Financial

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

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

Diversification Opportunities for Federated Max and Transamerica Financial

0.9

Correlation Coefficient

Federated Max  Transamerica Financial

Almost no diversification

The 3 months correlation between Federated and Transamerica is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Federated Max Cap Index and Transamerica Financial Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Financial and Federated Max 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 Federated Max Cap Index 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 Federated Max i.e., Federated Max and Transamerica Financial go up and down completely randomly.

Pair Corralation between Federated Max and Transamerica Financial

Assuming the 90 days horizon Federated Max Cap Index is expected to generate 1.0 times more return on investment than Transamerica Financial. However, Federated Max Cap Index is 1.0 times less risky than Transamerica Financial. It trades about 0.19 of its potential returns per unit of risk. Transamerica Financial Life is currently generating about 0.13 per unit of risk. If you would invest  751.00  in Federated Max Cap Index on September 12, 2024 and sell it today you would earn a total of  60.00  from holding Federated Max Cap Index or generate 7.99% return on investment over 90 days.

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

Federated Max Cap Index  vs.  Transamerica Financial Life

Federated Max Cap

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Max Cap Index are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Federated Max may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Transamerica Financial

Risk-Adjusted Performance

10 of 100

Good

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.

Pair Trading with Federated Max and Transamerica Financial

The main advantage of trading using opposite Federated Max and Transamerica Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Max 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 Federated Max Cap Index 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.