Correlation Between Transamerica Cleartrack and Utilities Fund

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

By analyzing existing cross correlation between Transamerica Cleartrack Retirement and Utilities Fund Class, you can compare the effects of market volatilities on Transamerica Cleartrack and Utilities Fund 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 Cleartrack with a short position of Utilities Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Cleartrack and Utilities Fund.

Diversification Opportunities for Transamerica Cleartrack and Utilities Fund

0.26

Correlation Coefficient

Transamerica Cleartrack  Utilities Fund

Modest diversification

The 3 months correlation between Transamerica and Utilities is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Cleartrack Retire and Utilities Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Fund Class and Transamerica Cleartrack 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 Cleartrack Retirement are associated (or correlated) with Utilities Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Fund Class has no effect on the direction of Transamerica Cleartrack i.e., Transamerica Cleartrack and Utilities Fund go up and down completely randomly.

Pair Corralation between Transamerica Cleartrack and Utilities Fund

Assuming the 90 days horizon Transamerica Cleartrack Retirement is expected to generate 0.33 times more return on investment than Utilities Fund. However, Transamerica Cleartrack Retirement is 3.04 times less risky than Utilities Fund. It trades about 0.06 of its potential returns per unit of risk. Utilities Fund Class is currently generating about -0.03 per unit of risk. If you would invest  827.00  in Transamerica Cleartrack Retirement on September 18, 2024 and sell it today you would earn a total of  9.00  from holding Transamerica Cleartrack Retirement or generate 1.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Transamerica Cleartrack Retire  vs.  Utilities Fund Class

Transamerica Cleartrack

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Cleartrack Retirement are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transamerica Cleartrack is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Utilities Fund Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Utilities Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Utilities Fund 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 Cleartrack and Utilities Fund

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

The idea behind Transamerica Cleartrack Retirement and Utilities Fund Class 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.