Correlation Between Alger Small and Alger Capital
Can any of the company-specific risk be diversified away by investing in both Alger Small and Alger Capital 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 Alger Small and Alger Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alger Small Cap and Alger Capital Appreciation, you can compare the effects of market volatilities on Alger Small and Alger Capital 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 Alger Small with a short position of Alger Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Small and Alger Capital.
Diversification Opportunities for Alger Small and Alger Capital
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alger and Alger is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Alger Small Cap and Alger Capital Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Capital Apprec and Alger Small 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 Alger Small Cap are associated (or correlated) with Alger Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Capital Apprec has no effect on the direction of Alger Small i.e., Alger Small and Alger Capital go up and down completely randomly.
Pair Corralation between Alger Small and Alger Capital
Assuming the 90 days horizon Alger Small is expected to generate 2.68 times less return on investment than Alger Capital. But when comparing it to its historical volatility, Alger Small Cap is 1.03 times less risky than Alger Capital. It trades about 0.04 of its potential returns per unit of risk. Alger Capital Appreciation is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,842 in Alger Capital Appreciation on August 27, 2024 and sell it today you would earn a total of 2,271 from holding Alger Capital Appreciation or generate 79.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alger Small Cap vs. Alger Capital Appreciation
Performance |
| Timeline |
| Alger Small Cap |
| Alger Capital Apprec |
Alger Small and Alger Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alger Small and Alger Capital
The main advantage of trading using opposite Alger Small and Alger Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Small position performs unexpectedly, Alger Capital 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 Capital will offset losses from the drop in Alger Capital's long position.| Alger Small vs. Aig Government Money | Alger Small vs. Virtus Seix Government | Alger Small vs. John Hancock Government | Alger Small vs. Blackrock Government Bond |
| Alger Capital vs. Tax Managed Large Cap | Alger Capital vs. Fisher Large Cap | Alger Capital vs. Aqr Large Cap | Alger Capital vs. T Rowe Price |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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