Correlation Between Transamerica High and Ep Emerging

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

By analyzing existing cross correlation between Transamerica High Yield and Ep Emerging Markets, you can compare the effects of market volatilities on Transamerica High and Ep Emerging 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 High with a short position of Ep Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica High and Ep Emerging.

Diversification Opportunities for Transamerica High and Ep Emerging

-0.25

Correlation Coefficient

Transamerica High  Ep Emerging

Very good diversification

The 3 months correlation between Transamerica and EPASX is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica High Yield and Ep Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ep Emerging Markets and Transamerica High 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 High Yield are associated (or correlated) with Ep Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ep Emerging Markets has no effect on the direction of Transamerica High i.e., Transamerica High and Ep Emerging go up and down completely randomly.

Pair Corralation between Transamerica High and Ep Emerging

Assuming the 90 days horizon Transamerica High is expected to generate 2.18 times less return on investment than Ep Emerging. But when comparing it to its historical volatility, Transamerica High Yield is 7.13 times less risky than Ep Emerging. It trades about 0.13 of its potential returns per unit of risk. Ep Emerging Markets is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  966.00  in Ep Emerging Markets on September 16, 2024 and sell it today you would earn a total of  23.00  from holding Ep Emerging Markets or generate 2.38% return on investment over 90 days.

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

Transamerica High Yield  vs.  Ep Emerging Markets

Transamerica High Yield

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica High Yield are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Transamerica High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ep Emerging Markets

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ep Emerging Markets are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ep Emerging 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 High and Ep Emerging

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

The idea behind Transamerica High Yield and Ep Emerging Markets 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.