Correlation Between Alger Health and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both Alger Health and Diamond Hill 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 Health and Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alger Health Sciences and Diamond Hill Long Short, you can compare the effects of market volatilities on Alger Health and Diamond Hill 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 Health with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Health and Diamond Hill.
Diversification Opportunities for Alger Health and Diamond Hill
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Alger and Diamond is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Alger Health Sciences and Diamond Hill Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Long and Alger Health 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 Health Sciences are associated (or correlated) with Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Long has no effect on the direction of Alger Health i.e., Alger Health and Diamond Hill go up and down completely randomly.
Pair Corralation between Alger Health and Diamond Hill
Assuming the 90 days horizon Alger Health Sciences is expected to generate 1.78 times more return on investment than Diamond Hill. However, Alger Health is 1.78 times more volatile than Diamond Hill Long Short. It trades about 0.07 of its potential returns per unit of risk. Diamond Hill Long Short is currently generating about 0.1 per unit of risk. If you would invest 1,190 in Alger Health Sciences on September 4, 2024 and sell it today you would earn a total of 176.00 from holding Alger Health Sciences or generate 14.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alger Health Sciences vs. Diamond Hill Long Short
Performance |
| Timeline |
| Alger Health Sciences |
| Diamond Hill Long |
Alger Health and Diamond Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alger Health and Diamond Hill
The main advantage of trading using opposite Alger Health and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Health position performs unexpectedly, Diamond Hill 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 Diamond Hill will offset losses from the drop in Diamond Hill's long position.| Alger Health vs. Health Biotchnology Portfolio | Alger Health vs. Baron Health Care | Alger Health vs. Health Biotchnology Portfolio | Alger Health vs. Highland Longshort Healthcare |
| Diamond Hill vs. Alger Health Sciences | Diamond Hill vs. Baron Health Care | Diamond Hill vs. Alphacentric Lifesci Healthcare | Diamond Hill vs. Allianzgi Health Sciences |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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