Correlation Between Alger Capital and Vanguard Financials
Can any of the company-specific risk be diversified away by investing in both Alger Capital and Vanguard Financials 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 Capital and Vanguard Financials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alger Capital Appreciation and Vanguard Financials Index, you can compare the effects of market volatilities on Alger Capital and Vanguard Financials 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 Capital with a short position of Vanguard Financials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Capital and Vanguard Financials.
Diversification Opportunities for Alger Capital and Vanguard Financials
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Alger and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Alger Capital Appreciation and Vanguard Financials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Financials Index and Alger Capital 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 Capital Appreciation are associated (or correlated) with Vanguard Financials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Financials Index has no effect on the direction of Alger Capital i.e., Alger Capital and Vanguard Financials go up and down completely randomly.
Pair Corralation between Alger Capital and Vanguard Financials
Assuming the 90 days horizon Alger Capital Appreciation is expected to generate 1.84 times more return on investment than Vanguard Financials. However, Alger Capital is 1.84 times more volatile than Vanguard Financials Index. It trades about 0.22 of its potential returns per unit of risk. Vanguard Financials Index is currently generating about 0.03 per unit of risk. If you would invest 2,058 in Alger Capital Appreciation on September 13, 2024 and sell it today you would earn a total of 111.00 from holding Alger Capital Appreciation or generate 5.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alger Capital Appreciation vs. Vanguard Financials Index
Performance |
| Timeline |
| Alger Capital Apprec |
| Vanguard Financials Index |
Alger Capital and Vanguard Financials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alger Capital and Vanguard Financials
The main advantage of trading using opposite Alger Capital and Vanguard Financials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Capital position performs unexpectedly, Vanguard Financials 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 Vanguard Financials will offset losses from the drop in Vanguard Financials' long position.| Alger Capital vs. Alger Midcap Growth | Alger Capital vs. Alger Midcap Growth | Alger Capital vs. Alger Mid Cap | Alger Capital vs. Alger Small Cap |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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