Correlation Between Alger Small and Arrow Managed
Can any of the company-specific risk be diversified away by investing in both Alger Small and Arrow Managed 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 Small and Arrow Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alger Small Cap and Arrow Managed Futures, you can compare the effects of market volatilities on Alger Small and Arrow Managed 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 Small with a short position of Arrow Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Small and Arrow Managed.
Diversification Opportunities for Alger Small and Arrow Managed
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alger and Arrow is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Alger Small Cap and Arrow Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Managed Futures and Alger Small 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 Small Cap are associated (or correlated) with Arrow Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Managed Futures has no effect on the direction of Alger Small i.e., Alger Small and Arrow Managed go up and down completely randomly.
Pair Corralation between Alger Small and Arrow Managed
Assuming the 90 days horizon Alger Small Cap is expected to generate 1.16 times more return on investment than Arrow Managed. However, Alger Small is 1.16 times more volatile than Arrow Managed Futures. It trades about 0.24 of its potential returns per unit of risk. Arrow Managed Futures is currently generating about 0.01 per unit of risk. If you would invest 1,714 in Alger Small Cap on September 2, 2024 and sell it today you would earn a total of 384.00 from holding Alger Small Cap or generate 22.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alger Small Cap vs. Arrow Managed Futures
Performance |
| Timeline |
| Alger Small Cap |
| Arrow Managed Futures |
Alger Small and Arrow Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alger Small and Arrow Managed
The main advantage of trading using opposite Alger Small and Arrow Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Small position performs unexpectedly, Arrow Managed 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 Arrow Managed will offset losses from the drop in Arrow Managed's long position.| Alger Small vs. M Large Cap | Alger Small vs. Dodge Cox Stock | Alger Small vs. Aqr Large Cap | Alger Small vs. American Mutual Fund |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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