Correlation Between Transamerica Large and Value Fund

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

Diversification Opportunities for Transamerica Large and Value Fund

0.92

Correlation Coefficient

Transamerica Large  Value Fund

Almost no diversification

The 3 months correlation between Transamerica and Value is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Large Cap and Value Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund A 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 Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund A has no effect on the direction of Transamerica Large i.e., Transamerica Large and Value Fund go up and down completely randomly.

Pair Corralation between Transamerica Large and Value Fund

Assuming the 90 days horizon Transamerica Large Cap is expected to generate 1.09 times more return on investment than Value Fund. However, Transamerica Large is 1.09 times more volatile than Value Fund A. It trades about 0.12 of its potential returns per unit of risk. Value Fund A is currently generating about 0.09 per unit of risk. If you would invest  1,459  in Transamerica Large Cap on September 13, 2024 and sell it today you would earn a total of  68.00  from holding Transamerica Large Cap or generate 4.66% return on investment over 90 days.

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

Transamerica Large Cap  vs.  Value Fund A

Transamerica Large Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Large Cap are ranked lower than 9 (%) 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.

Value Fund A

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund A are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Value Fund 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 Value Fund

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

The idea behind Transamerica Large Cap and Value Fund A 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.