Correlation Between Touchstone Small and Transamerica Financial

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

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

Diversification Opportunities for Touchstone Small and Transamerica Financial

0.93

Correlation Coefficient

Touchstone Small  Transamerica Financial

Almost no diversification

The 3 months correlation between Touchstone and Transamerica is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Pany and Transamerica Financial Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Financial and Touchstone Small 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 Touchstone Small Pany 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 Touchstone Small i.e., Touchstone Small and Transamerica Financial go up and down completely randomly.

Pair Corralation between Touchstone Small and Transamerica Financial

Assuming the 90 days horizon Touchstone Small Pany is expected to under-perform the Transamerica Financial. In addition to that, Touchstone Small is 1.72 times more volatile than Transamerica Financial Life. It trades about 0.0 of its total potential returns per unit of risk. Transamerica Financial Life is currently generating about 0.0 per unit of volatility. If you would invest  1,188  in Transamerica Financial Life on September 19, 2024 and sell it today you would lose (1.00) from holding Transamerica Financial Life or give up 0.08% of portfolio value over 90 days.

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

Touchstone Small Pany  vs.  Transamerica Financial Life

Touchstone Small Pany

Risk-Adjusted Performance

0 of 100

Very Weak

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

Transamerica Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica Financial Life has generated negative risk-adjusted returns adding no value to fund investors. 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 Touchstone Small and Transamerica Financial

The main advantage of trading using opposite Touchstone Small and Transamerica Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small 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 Touchstone Small Pany 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.