Correlation Between Transamerica Small/mid and Tweedy Browne

Can any of the company-specific risk be diversified away by investing in both Transamerica Small/mid and Tweedy Browne 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 Small/mid and Tweedy Browne into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transamerica Smallmid Cap and Tweedy Browne Global, you can compare the effects of market volatilities on Transamerica Small/mid and Tweedy Browne 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 Small/mid with a short position of Tweedy Browne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Small/mid and Tweedy Browne.

Diversification Opportunities for Transamerica Small/mid and Tweedy Browne

-0.62

Correlation Coefficient

Transamerica Small/mid  Tweedy Browne

Excellent diversification

The 3 months correlation between Transamerica and Tweedy is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Smallmid Cap and Tweedy Browne Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tweedy Browne Global and Transamerica Small/mid 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 Smallmid Cap are associated (or correlated) with Tweedy Browne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tweedy Browne Global has no effect on the direction of Transamerica Small/mid i.e., Transamerica Small/mid and Tweedy Browne go up and down completely randomly.

Pair Corralation between Transamerica Small/mid and Tweedy Browne

Assuming the 90 days horizon Transamerica Smallmid Cap is expected to generate 1.33 times more return on investment than Tweedy Browne. However, Transamerica Small/mid is 1.33 times more volatile than Tweedy Browne Global. It trades about 0.1 of its potential returns per unit of risk. Tweedy Browne Global is currently generating about -0.19 per unit of risk. If you would invest  3,160  in Transamerica Smallmid Cap on August 30, 2024 and sell it today you would earn a total of  169.00  from holding Transamerica Smallmid Cap or generate 5.35% return on investment over 90 days.

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

Transamerica Smallmid Cap  vs.  Tweedy Browne Global

Transamerica Smallmid Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Smallmid Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Transamerica Small/mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tweedy Browne Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tweedy Browne Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Transamerica Small/mid and Tweedy Browne

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

The idea behind Transamerica Smallmid Cap and Tweedy Browne Global 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 CEOs Directory module to screen CEOs from public companies around the world.