Correlation Between Alger Health and Health Biotchnology
Can any of the company-specific risk be diversified away by investing in both Alger Health and Health Biotchnology 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 Health Biotchnology 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 Health Biotchnology Portfolio, you can compare the effects of market volatilities on Alger Health and Health Biotchnology 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 Health Biotchnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Health and Health Biotchnology.
Diversification Opportunities for Alger Health and Health Biotchnology
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alger and Health is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Alger Health Sciences and Health Biotchnology Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Biotchnology 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 Health Biotchnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Biotchnology has no effect on the direction of Alger Health i.e., Alger Health and Health Biotchnology go up and down completely randomly.
Pair Corralation between Alger Health and Health Biotchnology
Assuming the 90 days horizon Alger Health Sciences is expected to generate 0.85 times more return on investment than Health Biotchnology. However, Alger Health Sciences is 1.18 times less risky than Health Biotchnology. It trades about 0.14 of its potential returns per unit of risk. Health Biotchnology Portfolio is currently generating about 0.07 per unit of risk. If you would invest 1,337 in Alger Health Sciences on September 1, 2024 and sell it today you would earn a total of 33.00 from holding Alger Health Sciences or generate 2.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alger Health Sciences vs. Health Biotchnology Portfolio
Performance |
| Timeline |
| Alger Health Sciences |
| Health Biotchnology |
Alger Health and Health Biotchnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alger Health and Health Biotchnology
The main advantage of trading using opposite Alger Health and Health Biotchnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Health position performs unexpectedly, Health Biotchnology 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 Health Biotchnology will offset losses from the drop in Health Biotchnology's long position.| Alger Health vs. Small Cap Equity | Alger Health vs. Us Strategic Equity | Alger Health vs. Ultra Short Fixed Income | Alger Health vs. Calamos Global Equity |
| Health Biotchnology vs. Victory Strategic Allocation | Health Biotchnology vs. Alternative Asset Allocation | Health Biotchnology vs. Enhanced Large Pany | Health Biotchnology vs. Old Westbury Large |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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