Correlation Between Transamerica Emerging and Catholic Values

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

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

Diversification Opportunities for Transamerica Emerging and Catholic Values

0.29

Correlation Coefficient

Transamerica Emerging  Catholic Values

Modest diversification

The 3 months correlation between Transamerica and Catholic is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Emerging Markets and Catholic Values Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catholic Values Fixed and Transamerica Emerging 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 Emerging Markets are associated (or correlated) with Catholic Values. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catholic Values Fixed has no effect on the direction of Transamerica Emerging i.e., Transamerica Emerging and Catholic Values go up and down completely randomly.

Pair Corralation between Transamerica Emerging and Catholic Values

Assuming the 90 days horizon Transamerica Emerging Markets is expected to generate 2.7 times more return on investment than Catholic Values. However, Transamerica Emerging is 2.7 times more volatile than Catholic Values Fixed. It trades about 0.01 of its potential returns per unit of risk. Catholic Values Fixed is currently generating about -0.14 per unit of risk. If you would invest  809.00  in Transamerica Emerging Markets on September 19, 2024 and sell it today you would earn a total of  2.00  from holding Transamerica Emerging Markets or generate 0.25% return on investment over 90 days.

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

Transamerica Emerging Markets  vs.  Catholic Values Fixed

Transamerica Emerging

Risk-Adjusted Performance

0 of 100

Insignificant

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

Catholic Values Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catholic Values Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Catholic Values 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 Emerging and Catholic Values

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

The idea behind Transamerica Emerging Markets and Catholic Values Fixed 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.