Correlation Between Alger Health and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Alger Health and Metropolitan West 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 Metropolitan West 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 Metropolitan West Total, you can compare the effects of market volatilities on Alger Health and Metropolitan West 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 Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Health and Metropolitan West.
Diversification Opportunities for Alger Health and Metropolitan West
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Alger and Metropolitan is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alger Health Sciences and Metropolitan West Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Total 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 Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West Total has no effect on the direction of Alger Health i.e., Alger Health and Metropolitan West go up and down completely randomly.
Pair Corralation between Alger Health and Metropolitan West
Assuming the 90 days horizon Alger Health Sciences is expected to generate 1.99 times more return on investment than Metropolitan West. However, Alger Health is 1.99 times more volatile than Metropolitan West Total. It trades about 0.11 of its potential returns per unit of risk. Metropolitan West Total is currently generating about 0.12 per unit of risk. If you would invest 1,341 in Alger Health Sciences on September 4, 2024 and sell it today you would earn a total of 25.00 from holding Alger Health Sciences or generate 1.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Alger Health Sciences vs. Metropolitan West Total
Performance |
| Timeline |
| Alger Health Sciences |
| Metropolitan West Total |
Alger Health and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alger Health and Metropolitan West
The main advantage of trading using opposite Alger Health and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Health position performs unexpectedly, Metropolitan West 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 Metropolitan West will offset losses from the drop in Metropolitan West'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 Stocks Directory module to find actively traded stocks across global markets.
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