Correlation Between Transamerica Large and Thrivent Moderate

Can any of the company-specific risk be diversified away by investing in both Transamerica Large and Thrivent Moderate 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 Thrivent Moderate 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 Thrivent Moderate Allocation, you can compare the effects of market volatilities on Transamerica Large and Thrivent Moderate 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 Thrivent Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Large and Thrivent Moderate.

Diversification Opportunities for Transamerica Large and Thrivent Moderate

0.89

Correlation Coefficient

Transamerica Large  Thrivent Moderate

Very poor diversification

The 3 months correlation between Transamerica and Thrivent is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Large Cap and Thrivent Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Moderate 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 Thrivent Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Moderate has no effect on the direction of Transamerica Large i.e., Transamerica Large and Thrivent Moderate go up and down completely randomly.

Pair Corralation between Transamerica Large and Thrivent Moderate

Assuming the 90 days horizon Transamerica Large Cap is expected to generate 1.44 times more return on investment than Thrivent Moderate. However, Transamerica Large is 1.44 times more volatile than Thrivent Moderate Allocation. It trades about 0.15 of its potential returns per unit of risk. Thrivent Moderate Allocation is currently generating about 0.17 per unit of risk. If you would invest  1,450  in Transamerica Large Cap on September 12, 2024 and sell it today you would earn a total of  84.00  from holding Transamerica Large Cap or generate 5.79% return on investment over 90 days.

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

Transamerica Large Cap  vs.  Thrivent Moderate Allocation

Transamerica Large Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Large Cap are ranked lower than 11 (%) 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.

Thrivent Moderate

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent Moderate Allocation are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Thrivent Moderate 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 Thrivent Moderate

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

The idea behind Transamerica Large Cap and Thrivent Moderate Allocation 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.