Correlation Between Transamerica Large and Power Floating

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

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

Diversification Opportunities for Transamerica Large and Power Floating

0.64

Correlation Coefficient

Transamerica Large  Power Floating

Poor diversification

The 3 months correlation between Transamerica and Power is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Large Cap and Power Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Floating Rate and Transamerica Large 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 Large Cap are associated (or correlated) with Power Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Floating Rate has no effect on the direction of Transamerica Large i.e., Transamerica Large and Power Floating go up and down completely randomly.

Pair Corralation between Transamerica Large and Power Floating

Assuming the 90 days horizon Transamerica Large Cap is expected to under-perform the Power Floating. In addition to that, Transamerica Large is 9.83 times more volatile than Power Floating Rate. It trades about -0.03 of its total potential returns per unit of risk. Power Floating Rate is currently generating about 0.35 per unit of volatility. If you would invest  987.00  in Power Floating Rate on September 21, 2024 and sell it today you would earn a total of  15.00  from holding Power Floating Rate or generate 1.52% return on investment over 90 days.

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

Transamerica Large Cap  vs.  Power Floating Rate

Transamerica Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica Large Cap has generated negative risk-adjusted returns adding no value to fund investors. 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.

Power Floating Rate

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Power Floating Rate are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Power Floating 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 Large and Power Floating

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

The idea behind Transamerica Large Cap and Power Floating Rate 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.