Correlation Between Western Asset and Alger Growth

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

By analyzing existing cross correlation between Western Asset High and Alger Growth Income, you can compare the effects of market volatilities on Western Asset and Alger Growth 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 Western Asset with a short position of Alger Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Alger Growth.

Diversification Opportunities for Western Asset and Alger Growth

0.73

Correlation Coefficient

Western Asset  Alger Growth

Poor diversification

The 3 months correlation between Western and Alger is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Alger Growth Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Growth Income and Western Asset 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 Western Asset High are associated (or correlated) with Alger Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Growth Income has no effect on the direction of Western Asset i.e., Western Asset and Alger Growth go up and down completely randomly.

Pair Corralation between Western Asset and Alger Growth

Assuming the 90 days horizon Western Asset is expected to generate 2.61 times less return on investment than Alger Growth. But when comparing it to its historical volatility, Western Asset High is 3.48 times less risky than Alger Growth. It trades about 0.17 of its potential returns per unit of risk. Alger Growth Income is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7,764  in Alger Growth Income on October 21, 2024 and sell it today you would earn a total of  143.00  from holding Alger Growth Income or generate 1.84% return on investment over 90 days.

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

Western Asset High  vs.  Alger Growth Income

Western Asset High

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alger Growth Income

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Growth Income are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Alger Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Asset and Alger Growth

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

The idea behind Western Asset High and Alger Growth Income 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 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.