Correlation Between Alger Health and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Alger Health and Sterling 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 Health and Sterling Capital 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 Sterling Capital Stratton, you can compare the effects of market volatilities on Alger Health and Sterling 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 Health with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Health and Sterling Capital.
Diversification Opportunities for Alger Health and Sterling Capital
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alger and Sterling is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Alger Health Sciences and Sterling Capital Stratton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Stratton 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 Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Stratton has no effect on the direction of Alger Health i.e., Alger Health and Sterling Capital go up and down completely randomly.
Pair Corralation between Alger Health and Sterling Capital
Assuming the 90 days horizon Alger Health is expected to generate 8.14 times less return on investment than Sterling Capital. But when comparing it to its historical volatility, Alger Health Sciences is 1.96 times less risky than Sterling Capital. It trades about 0.05 of its potential returns per unit of risk. Sterling Capital Stratton is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 4,886 in Sterling Capital Stratton on August 26, 2024 and sell it today you would earn a total of 354.00 from holding Sterling Capital Stratton or generate 7.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alger Health Sciences vs. Sterling Capital Stratton
Performance |
| Timeline |
| Alger Health Sciences |
| Sterling Capital Stratton |
Alger Health and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alger Health and Sterling Capital
The main advantage of trading using opposite Alger Health and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Health position performs unexpectedly, Sterling 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 Sterling Capital will offset losses from the drop in Sterling Capital's long position.| Alger Health vs. Small Cap Value Series | Alger Health vs. Victory Rs Partners | Alger Health vs. Lord Abbett Small | Alger Health vs. Ab Discovery Value |
| Sterling Capital vs. Baillie Gifford Health | Sterling Capital vs. Prudential Health Sciences | Sterling Capital vs. Health Biotchnology Portfolio | Sterling Capital vs. Alger 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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