Correlation Between Alger Health and Free Market
Can any of the company-specific risk be diversified away by investing in both Alger Health and Free Market 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 Free Market 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 Free Market International, you can compare the effects of market volatilities on Alger Health and Free Market 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 Free Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Health and Free Market.
Diversification Opportunities for Alger Health and Free Market
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Alger and Free is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Alger Health Sciences and Free Market International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Free Market International 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 Free Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Free Market International has no effect on the direction of Alger Health i.e., Alger Health and Free Market go up and down completely randomly.
Pair Corralation between Alger Health and Free Market
Assuming the 90 days horizon Alger Health is expected to generate 1.16 times less return on investment than Free Market. In addition to that, Alger Health is 1.03 times more volatile than Free Market International. It trades about 0.06 of its total potential returns per unit of risk. Free Market International is currently generating about 0.07 per unit of volatility. If you would invest 1,029 in Free Market International on September 4, 2024 and sell it today you would earn a total of 177.00 from holding Free Market International or generate 17.2% 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. Free Market International
Performance |
| Timeline |
| Alger Health Sciences |
| Free Market International |
Alger Health and Free Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alger Health and Free Market
The main advantage of trading using opposite Alger Health and Free Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Health position performs unexpectedly, Free Market 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 Free Market will offset losses from the drop in Free Market'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 |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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