Correlation Between Western Asset and Alger 35

Can any of the company-specific risk be diversified away by investing in both Western Asset and Alger 35 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 35 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 35 Fund, you can compare the effects of market volatilities on Western Asset and Alger 35 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 35. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Alger 35.

Diversification Opportunities for Western Asset and Alger 35

0.77

Correlation Coefficient

Western Asset  Alger 35

Poor diversification

The 3 months correlation between Western and Alger is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Alger 35 Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger 35 Fund 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 35. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger 35 Fund has no effect on the direction of Western Asset i.e., Western Asset and Alger 35 go up and down completely randomly.

Pair Corralation between Western Asset and Alger 35

Assuming the 90 days horizon Western Asset is expected to generate 13.15 times less return on investment than Alger 35. But when comparing it to its historical volatility, Western Asset High is 7.25 times less risky than Alger 35. It trades about 0.19 of its potential returns per unit of risk. Alger 35 Fund is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  1,389  in Alger 35 Fund on September 4, 2024 and sell it today you would earn a total of  418.00  from holding Alger 35 Fund or generate 30.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Western Asset High  vs.  Alger 35 Fund

Western Asset High

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 14 (%) 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 35 Fund

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Alger 35 Fund are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger 35 showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Asset and Alger 35

The main advantage of trading using opposite Western Asset and Alger 35 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Alger 35 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 35 will offset losses from the drop in Alger 35's long position.

The idea behind Western Asset High and Alger 35 Fund 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..