Correlation Between Transamerica Financial and Alger Funds

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

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

Diversification Opportunities for Transamerica Financial and Alger Funds

0.91

Correlation Coefficient

Transamerica Financial  Alger Funds

Almost no diversification

The 3 months correlation between Transamerica and Alger is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Alger Funds Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Funds Mid and Transamerica Financial 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 Financial Life are associated (or correlated) with Alger Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Funds Mid has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Alger Funds go up and down completely randomly.

Pair Corralation between Transamerica Financial and Alger Funds

Assuming the 90 days horizon Transamerica Financial Life is expected to under-perform the Alger Funds. But the mutual fund apears to be less risky and, when comparing its historical volatility, Transamerica Financial Life is 2.06 times less risky than Alger Funds. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Alger Funds Mid is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,832  in Alger Funds Mid on September 12, 2024 and sell it today you would earn a total of  62.00  from holding Alger Funds Mid or generate 3.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Transamerica Financial Life  vs.  Alger Funds Mid

Transamerica Financial

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Financial Life are ranked lower than 10 (%) 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.

Alger Funds Mid

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Funds Mid are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Funds showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transamerica Financial and Alger Funds

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

The idea behind Transamerica Financial Life and Alger Funds Mid 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.