Correlation Between Thrivent Natural and Transamerica Large

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

By analyzing existing cross correlation between Thrivent Natural Resources and Transamerica Large Cap, you can compare the effects of market volatilities on Thrivent Natural and Transamerica Large 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 Thrivent Natural with a short position of Transamerica Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thrivent Natural and Transamerica Large.

Diversification Opportunities for Thrivent Natural and Transamerica Large

0.8

Correlation Coefficient

Thrivent Natural  Transamerica Large

Very poor diversification

The 3 months correlation between Thrivent and Transamerica is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent Natural Resources and Transamerica Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Cap and Thrivent Natural 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 Thrivent Natural Resources are associated (or correlated) with Transamerica Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Large Cap has no effect on the direction of Thrivent Natural i.e., Thrivent Natural and Transamerica Large go up and down completely randomly.

Pair Corralation between Thrivent Natural and Transamerica Large

Assuming the 90 days horizon Thrivent Natural is expected to generate 3.29 times less return on investment than Transamerica Large. But when comparing it to its historical volatility, Thrivent Natural Resources is 8.57 times less risky than Transamerica Large. It trades about 0.22 of its potential returns per unit of risk. Transamerica Large Cap is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,458  in Transamerica Large Cap on September 16, 2024 and sell it today you would earn a total of  47.00  from holding Transamerica Large Cap or generate 3.22% return on investment over 90 days.

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

Thrivent Natural Resources  vs.  Transamerica Large Cap

Thrivent Natural Res

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent Natural Resources are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Thrivent Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica Large Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Large Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transamerica Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Thrivent Natural and Transamerica Large

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

The idea behind Thrivent Natural Resources and Transamerica Large Cap 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.