Correlation Between Georgia Tax and Transamerica Financial

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

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

Diversification Opportunities for Georgia Tax and Transamerica Financial

-0.22

Correlation Coefficient

Georgia Tax  Transamerica Financial

Very good diversification

The 3 months correlation between Georgia and Transamerica is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Georgia Tax Free Bond and Transamerica Financial Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Financial and Georgia Tax 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 Georgia Tax Free Bond 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 Georgia Tax i.e., Georgia Tax and Transamerica Financial go up and down completely randomly.

Pair Corralation between Georgia Tax and Transamerica Financial

Assuming the 90 days horizon Georgia Tax Free Bond is expected to under-perform the Transamerica Financial. But the mutual fund apears to be less risky and, when comparing its historical volatility, Georgia Tax Free Bond is 1.66 times less risky than Transamerica Financial. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Transamerica Financial Life is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,192  in Transamerica Financial Life on August 21, 2024 and sell it today you would earn a total of  8.00  from holding Transamerica Financial Life or generate 0.67% return on investment over 90 days.

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

Georgia Tax Free Bond  vs.  Transamerica Financial Life

Georgia Tax Free

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Georgia Tax Free Bond are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Georgia Tax 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

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Financial Life are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. 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 Georgia Tax and Transamerica Financial

The main advantage of trading using opposite Georgia Tax and Transamerica Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Georgia Tax 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 Georgia Tax Free Bond 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..