Correlation Between Transamerica Emerging and Alger Smallcap

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Can any of the company-specific risk be diversified away by investing in both Transamerica Emerging and Alger Smallcap 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 Emerging and Alger Smallcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Emerging Markets and Alger Smallcap Growth, you can compare the effects of market volatilities on Transamerica Emerging and Alger Smallcap 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 Emerging with a short position of Alger Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Emerging and Alger Smallcap.

Diversification Opportunities for Transamerica Emerging and Alger Smallcap

0.04
  Correlation Coefficient

Significant diversification

The 3 months correlation between Transamerica and Alger is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Emerging Markets and Alger Smallcap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Smallcap Growth and Transamerica Emerging 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 Emerging Markets are associated (or correlated) with Alger Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Smallcap Growth has no effect on the direction of Transamerica Emerging i.e., Transamerica Emerging and Alger Smallcap go up and down completely randomly.

Pair Corralation between Transamerica Emerging and Alger Smallcap

Assuming the 90 days horizon Transamerica Emerging Markets is expected to under-perform the Alger Smallcap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Transamerica Emerging Markets is 1.52 times less risky than Alger Smallcap. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Alger Smallcap Growth is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,108  in Alger Smallcap Growth on October 20, 2024 and sell it today you would earn a total of  7.00  from holding Alger Smallcap Growth or generate 0.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Transamerica Emerging Markets  vs.  Alger Smallcap Growth

 Performance 
       Timeline  
Transamerica Emerging 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Transamerica Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, Transamerica Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Alger Smallcap Growth 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Alger Smallcap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Alger Smallcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica Emerging and Alger Smallcap Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Transamerica Emerging and Alger Smallcap

The main advantage of trading using opposite Transamerica Emerging and Alger Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Emerging position performs unexpectedly, Alger Smallcap 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 Smallcap will offset losses from the drop in Alger Smallcap's long position.
The idea behind Transamerica Emerging Markets and Alger Smallcap Growth 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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